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International market exposure to sovereign ESG

Author

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  • Christian Morgenstern

    (Imperial College London)

  • Guillaume Coqueret

    (EM - EMLyon Business School)

  • James Kelly

Abstract

We quantify equity and bond market sensitivity to sovereign ESG scores and their variations which, theoretically, is equivalent to evaluating the demand for ESG at the global scale. We do so by estimating a longitudinal model, at the issue level, that captures exposures to sovereign ESG factors for both equity and fixed income indices. In spite of the surging interest in ESG investing, our results do not support a strong impact of ESG factors on the returns of international markets, implying that the demand for ESG at the country level is not a significant driver of prices. Nevertheless, we document a strong association between GDP growth and ESG scores at the country level.

Suggested Citation

  • Christian Morgenstern & Guillaume Coqueret & James Kelly, 2024. "International market exposure to sovereign ESG," Post-Print hal-04325654, HAL.
    • Handle: RePEc:hal:journl:hal-04325654
    DOI: 10.1080/20430795.2022.2148817
    Note: View the original document on HAL open archive server: https://hal.science/hal-04325654v1
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    References listed on IDEAS

    as
    1. Ralph S. J. Koijen & Motohiro Yogo, 2019. "A Demand System Approach to Asset Pricing," Journal of Political Economy, University of Chicago Press, vol. 127(4), pages 1475-1515.
    2. Maretno Harjoto & Hoje Jo & Yongtae Kim, 2017. "Is Institutional Ownership Related to Corporate Social Responsibility? The Nonlinear Relation and Its Implication for Stock Return Volatility," Journal of Business Ethics, Springer, vol. 146(1), pages 77-109, November.
    3. Denitsa Angelova & Francesco Bosello & Andrea Bigano & Silvio Giove, 2021. "Sovereign rating methodologies, ESG and climate change risk: an overview," Working Papers 2021:15, Department of Economics, University of Venice "Ca' Foscari".
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    Cited by:

    1. Costantiello, Alberto & Leogrande, Angelo, 2023. "The Role Of Gdp Growth In The Esg Approach At World Level," SocArXiv r56hu, Center for Open Science.

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    More about this item

    Keywords

    Factor demand; longitudinal models; sovereign ESG; sustainable investing;
    All these keywords.

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