Barclays Expands Study on the Effect of ESG Ratings on Credit Portfolio Performance

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Barclays today released a new Impact Series study, entitled The case for sustainable bond investing strengthens, which adds nearly two years of data to its research into the relationship between Environmental, Social and Governance (ESG) investing and bond portfolio performance from 2016.

The follow-up report provides a deeper insight into the original findings by looking at the relationship between ESG factors and their influence on credit portfolio performance. This report expands the analysis of the effect of ESG on euro corporate, as well as US high-yield bond markets. The study was authored by the Quantitative Portfolio Strategy Team within Barclays Investment Bank Research department.

There is a lot of interest from our clients in the impact of sustainable investing on portfolio performance, said Lev Dynkin, Global Head of Quantitative Portfolio Strategy. A broad spectrum of clients is increasingly invested in businesses that generate positive societal impacts and an attractive financial return. This expanded Impact Series study illustrates the continued positive impact of ESG investing in the several credit markets.

The Impact Series is designed to explore the social impact of economic, demographic and disruptive changes affecting markets, sectors and society at large. The key findings of todays report include:

  • Barclays confirms 2016 findings that tilting a credit portfolio in favor of high ESG bonds, while keeping all other risk characteristics unchanged, tends to lead to higher performance in all three markets considered (US and euro investment grade and US high yield).
  • While the Governance (G) rating was previously most closely associated with performance, Environment has had the strongest effect in the past two years in the US and over nine years in Europe.
  • The link between E, S and G scores and performance varies across sectors. Governance is important in the banking sector, while Environment is significant in most others.
  • The euro credit market prices ESG attributes differently than the US market: high ESG bonds trade at persistently tighter spreads than low ESG peers in Europe, but not in the US. European issuers also tend to have higher ESG ratings than US issuers.

For more information or to view the full report and executive summary infographic, please click here.

About Barclays Social Innovation Facility

The Barclays Social Innovation Facility is a catalyst for the development of innovative products and services that deliver both an ongoing commercial return and a sustained social impact. It was launched in 2012 and is a key part of the firms Shared Growth Ambition. The Impact Series is designed to explore the social impact of economic, demographic and disruptive changes affecting markets, sectors and society at large.

About Barclays

Barclays is a transatlantic consumer and wholesale bank offering products and services across personal, corporate and investment banking, credit cards and wealth management, with a strong presence in our two home markets of the UK and the US.

With over 325 years of history and expertise in banking, Barclays operates in over 40 countries and employs approximately 80,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide.

For further information about Barclays, please visit our website

Danielle Popper
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