Bruno Gerard

Beta – Scandinavian Journal of Business Research 33(1) p. 61-83 Doi: https://doi.org/10.18261/issn.1504-3134-2019-01-05

We review the literature on ESG and Socially Responsible Investment with a special focus on fixed-income investments. Most of the academic research is focused on the link between corporate CSR and ESG activities, investors’ SR engagement and stock returns and firm value. Very few studies examine the link between firm ESG policies and bond prices, risks and returns, and the performance of SR FI funds. The studies linking CSR to firm value suggest that higher CSR leads to higher corporate value, higher equity returns, and lower risk, enhancing the general collateral value of the firm. The FI income studies provide mixed evidence about the link between issuer ESG scores and bond prices and return characteristics: the bonds of issuers with both excellent and very poor ESG behavior tend to underperform the bonds of issuers with neither very strong nor very poor ESG scores. Lastly, while issuers’ ESG excellence may have led to both their equity and debt outperforming those of poorer ESG issuers in the 1990s, this out-performance halved in the first part of the 2000s and completely disappeared after the financial crisis. Markets seem now to largely price ESG performance into equity and bond prices.

Review of Finance 19(4) p. 1543-1585 Doi: https://doi.org/10.1093/rof/rfu036

Journal of Financial Econometrics 12(4) p. 645-678 Doi: https://doi.org/10.1093/jjfinec/nbu009

Review of Finance 16(3) p. 755-798 Doi: https://doi.org/10.1093/rof/rfq034

Journal of International Money and Finance 31(5) p. 1249-1278 Doi: https://doi.org/10.1016/j.jimonfin.2012.01.015

We examine the relative importance of country, industry, world market and currency risk factors for international stock returns. Our approach focuses on testing the mean-variance efficiency of the various factor portfolios. An unconditional analysis does not detect significant differences between country, industry and world portfolios, nor any role for currency risk factors. However, when we allow expected returns, volatilities and correlations to vary over time, we find that equity returns are mainly driven by global industry and currency risk factors. We propose a novel test to evaluate the relative benefits of alternative investment strategies and find that including currencies is critical to take full advantage of the diversification benefits afforded by international markets.