Doing well while doing good: ESG ratings and corporate bond returns

Sebastian A. Gehricke, Xinfeng Ruan*, Jin E. Zhang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)


The relationship between ESG performance and equity returns has become a popular area of research, but the same is not yet the case for bond returns. In this paper, we explore whether incorporating ESG factors, beyond emissions into the bond portfolio investment process leads to under or out performance. We find that ESG investing in bond portfolios does not lead to over or under performance. In other words, you do not have to ‘pay to do good’. Further, in the period since the Paris agreement, Energy sector bond portfolio returns are positively related to ESG factors. This finding aligns with the theoretical prediction of Pedersen, Fitzgibbons, and Pomorski (2020), namely, that the ESG-return relationship should become positive as investors become more aware of ESG risks and opportunities. Overall, we show that Bond investors can ‘do well while doing good’.

Original languageEnglish
Pages (from-to)1916-1934
JournalApplied Economics
Issue number16
Publication statusPublished - Jan 2024
Externally publishedYes


  • ESG
  • corporate bond returns
  • responsible investing
  • sustainable investing


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