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Sovereign Bonds and Socially Responsible Investment

  • Bastien Drut

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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File URL: http://economix.fr/pdf/dt/2009/WP_EcoX_2009-17.pdf
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Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2009-17.

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Length: 23 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:drm:wpaper:2009-17
Contact details of provider: Postal: 200 Avenue de la République, Bât. G - 92001 Nanterre Cedex
Web page: http://economix.frEmail:


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  10. Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2008. "Socially responsible investments: Institutional aspects, performance, and investor behavior," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1723-1742, September.
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  16. Bauer, Rob & Koedijk, Kees & Otten, Roger, 2005. "International evidence on ethical mutual fund performance and investment style," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1751-1767, July.
  17. Nijman, T.E. & de Roon, F.A., 2001. "Testing for mean-variance spanning : A survey," Other publications TiSEM 0159f80a-c61b-4519-b004-a, School of Economics and Management.
  18. Paldam, Martin, 2002. "The cross-country pattern of corruption: economics, culture and the seesaw dynamics," European Journal of Political Economy, Elsevier, vol. 18(2), pages 215-240, June.
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