ESG's Impact on Credit Bond Pricing and Investment Strategy Construction
The aim of this study is to design a set of effective methodological paths for ESG-integrated fixed income investment.This research highlights that investment horizon and economic cycle identification,and double materiality target definition are two key prerequisites for constructing effective fixed income ESG investments.In order to reveal the potential impact of ESG factors on credit spreads,this paper launches an empirical analysis of the correlation between ESG factor values and maturity.The results show that ESG ratings are correlated with cred-it ratings and that ESG evaluations complement traditional credit ratings well.ESG scores and E,S,G dimension scores can significantly explain the credit spread of bonds,ESG ratings can affect the pricing of credit bond risk,and can provide investors with information beyond the credit rating.Overall,the empirical results of the strategy prove that the financial preference strategy constructed after differentiation based on double materiality factors ex-hibits both a good differentiation in the distribution of ESG scores as well as an excellent performance relative to the benchmark in terms of volatility and investment returns over a backtesting period of more than 3 years.Subse-quently,combined with the correlation analysis between earnings and debt repayment and single-factor effective-ness analysis,strategy optimization can be considered on the basis of ESG financial optimization strategy portfolio,such as policy analysis,duration strategy and yield curve strategy.
ESGcredit bondsESG ratingsESG investingfixed income investinggreen investinginvest-ment strategiesbond pricing
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