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Sovereign Bonds and Socially Responsible Investment

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  • Bastien Drut

Abstract

While the literature on Socially Responsible Investment (SRI) is mainly focused on the stock market, little attention has been paid to SRI in sovereign bonds. This paper investigates the effect of taking into account socially responsible indicators for countries, the Vigeo Sustainability Ratings (VSR), on the efficient frontier formed with the sovereign bonds of twenty developed countries. It shows that it is possible to increase the portfolios’ VSR rating without significantly harming the risk/return relationship. The analysis then focuses on specific ratings relating to a) the environment, b) social concerns, and c) public governance. The results suggest that socially responsible portfolios of sovereign bonds can be built without a significant diversification cost.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 09-014.RS.

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Length: 23 p.
Date of creation: 2009
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:09-014

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Keywords: Socially Responsible Investment; Sovereign Bonds; Portfolio Selection; Rating; Spanning Tests; Mean-variance efficiency; Portfolio Choice.;

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References

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Citations

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Cited by:
  1. Marie Brière & Bastien Drut & Valérie Mignon & Kim Oosterlinck & Ariane Szafarz, 2012. "Is the Market Portfolio Efficient? A New Test of Mean-Variance Efficiency when All Assets Are Risky," Working Papers CEB 12-003, ULB -- Universite Libre de Bruxelles.
  2. Bert Scholtens, 2010. "The Environmental Performance of Dutch Government Bond Funds," Journal of Business Ethics, Springer, vol. 92(1), pages 117-130, April.
  3. Bastien Drut, 2009. "Nice but cautious guys: The cost of responsible investing in the bond markets," Working Papers CEB 09-034.RS, ULB -- Universite Libre de Bruxelles.

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