Impact of ESG Performance and Disclosure on Premiums in the Corporate Bond Market: Evidence from Propensity Score Matching

This paper is about the impact of ESG ratings and disclosure on corporate bond pricing based on propensity score matching method.

In this paper, I focus on quantifying the impact of environmental, social, and governance (ESG) ratings and disclosures on yield spread for corporate bonds in the US market, while accounting for confounding factors using propensity score matching. Given the increased need to understand the financial materiality of ESG, it is believed that the findings presented in this paper will appeal to a broad audience. Although previous research has measured the impact of ESG in the capital markets, their methods did not control for financial metrics in the study universe, nor did they remove self-selection bias. This paper is one of the first identifying the impact of ESG on cost of debt associated with corporate bonds.