ESG Performance, Green Bonds, and Yield Spreads - an empirical study of the Norwegian corporate bond market
Master thesis

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Date
2022Metadata
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- Master of Science [1822]
Abstract
This paper seeks to study the relationship between environmental,
social, and governance (ESG) performance, green bonds, and yield
spreads in the Norwegian corporate bond market. By imposing a
clustering model with fixed effects and a linear mixed effect model,
we intend to answer whether ESG performance and sustainability,
proxied through ESG ratings and green bonds, impact corporate
yield spreads, following the belief that ESG- and sustainabilitylinked
risks are financially material. The analyses utilize Nordic
Bond Pricing’s historical bond price data, paired with a database
consisting of ESG ratings, company-specific financials, and bond
characteristics. Our results suggest that aggregated ESG performance
is unrelated to yield spreads, while higher individual pillar
performance is penalized with higher yield spreads in the Norwegian
secondary bond market. On the other hand, green bonds
appear to trade at lower yield spreads compared to their non-green
counterparties, but poor data quality is believed to contaminate
the results, rendering the results questionable.
Description
Masteroppgave(MSc) in Master of Science in Finance - Handelshøyskolen BI, 2022