The effect of environmental sustainability on credit risk

André Höck, Christian Klein, Alexander Landau, Bernhard Zwergel

2020 | Academic | Credit Risk, Fixed Income

In particular for bond investors, there is not much academic guidance on how to integrate sustainability criteria in the investment process. Hence, this study investigates the impact of environmental sustainability on the pricing of credit risk for European corporations. Furthermore, whether or not the credit worthiness of a corporation has a moderating effect on the relationship between the environmental sustainability and the credit risk premium is analyzed. The findings prove that more sustainable companies have lower credit risk premiums if they also have a high credit worthiness.