EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE MARCH 2014 EDITION.
Using data contributed by RepRisk, a Swiss-based ESG business intelligence provider, the authors examined the effect of CSR-related negative media attention on credit default swap spreads. According to the study, companies that are criticized in the news for irresponsible ESG practices have higher credit default swap spreads, suggesting that a firm’s poor reputation when it comes to CSR issues could have a significant impact on its financial performance. On a practical level, this means that information on ESG risks is relevant for fixed income investors.