Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JFI
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Fixed Income
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Fixed Income

The Journal of Fixed Income

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JFI
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

ESG Impact on High-Yield Returns

Martin Fridson, Lu Jiang, Zhiyuan Mei and Daniel Navaei
The Journal of Fixed Income Spring 2021, 30 (4) 53-63; DOI: https://doi.org/10.3905/jfi.2021.1.108
Martin Fridson
is the chief investment officer of Lehmann Livian Fridson Advisors LLC in New York, NY
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Lu Jiang
is a master in quantitative finance candidate at Fordham University in New York, NY
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Zhiyuan Mei
is a master in quantitative finance candidate at Fordham University in New York, NY
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Daniel Navaei
is an intern at Livian & Co. in New York, NY
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600

Abstract

High-yield bond investors who adopt an environmental, social, and governance (ESG) discipline must consider the potential impact on returns. Recently introduced high-yield benchmarks for ESG-conscious portfolios make it possible to quantify these effects. ESG-based high-yield indexes produced higher historical returns than a standard high-index, but those differences are not statistically significant. The apparently superior downside protection provided by ESG-oriented funds in down markets is explained by two major confounding factors: the ESG-based indexes’ underweighting in Energy bonds and lowest-rated issues. High-yield investors cannot reliably cushion their returns during sell-offs by avoiding issuers involved in controversial weapons or with poor scores in other ESG categories. Energy companies with good ESG scores show no tendency to provide or to not provide superior downside protection in a high-yield bear market. The overall evidence to date on relative performance confirms neither a bonus nor a penalty for adhering to ESG principles within a high-yield portfolio. The growth of investing with attention to ESG factors has generated considerable controversy. Both proponents and critics are keen to answer this question: Must ESG-conscious investors sacrifice return for the sake of their principles, or do good ESG corporate citizens achieve higher profits with less risk, and actually outperform standard indexes? The authors address this question by comparing the returns of recently introduced ESG high-yield indexes and a standard index of the asset class.

TOPICS: Fixed income and structured finance, ESG investing, mutual funds/passive investing/indexing, performance measurement

Key Findings

  • ▪ Recently introduced high-yield benchmarks for ESG-conscious portfolios make it possible to quantify the performance impact of adopting an ESG discipline.

  • ▪ ESG-based high-yield indexes produced higher historical returns than a standard high-yield index, but the differences are not statistically significant.

  • ▪ The apparently superior downside protection provided by ESG-oriented funds in down markets is explained by two major confounding factors. ESG-based high-yield indexes are underweighted in energy bonds and lowest-rated issues.

  • © 2021 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Fixed Income: 30 (4)
The Journal of Fixed Income
Vol. 30, Issue 4
Spring 2021
  • Table of Contents
  • Index by author
  • Complete Issue (PDF)
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Fixed Income.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
ESG Impact on High-Yield Returns
(Your Name) has sent you a message from The Journal of Fixed Income
(Your Name) thought you would like to see the The Journal of Fixed Income web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
ESG Impact on High-Yield Returns
Martin Fridson, Lu Jiang, Zhiyuan Mei, Daniel Navaei
The Journal of Fixed Income Mar 2021, 30 (4) 53-63; DOI: 10.3905/jfi.2021.1.108

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
ESG Impact on High-Yield Returns
Martin Fridson, Lu Jiang, Zhiyuan Mei, Daniel Navaei
The Journal of Fixed Income Mar 2021, 30 (4) 53-63; DOI: 10.3905/jfi.2021.1.108
del.icio.us logo Digg logo Reddit logo Twitter logo CiteULike logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • HIGH-YIELD INDEX DESCRIPTIONS
    • COMPOSITION OF ESG-BASED HIGH-YIELD INDEXES
    • COMPARING CONVENTIONAL AND ESG HIGH-YIELD INDEX RETURNS
    • SOURCES OF SUPERIOR DOWNSIDE PROTECTION
    • TESTING FOR THE CONTRIBUTION OF ESG FACTORS TO SUPERIOR DOWNSIDE PROTECTION
    • RESULTS OF CONFOUNDING FACTORS ANALYSIS
    • ESG-QUALIFIED ENERGY ISSUES’ MARCH 2020 PERFORMANCE
    • CONCLUSION
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log in
  • Update your Profile
  • Give us your feedback

© 2021 Pageant Media Ltd | All Rights Reserved | ISSN: 1059-8596 | E-ISSN: 2168-8648

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies