Barclays Social Innovation releases first report in new Impact Series

New York, Oct. 31 – Barclays Bank plc released the first report in a new Impact Series from the Barclays Social Innovation Facility, which highlights new research into the relationship between environmental, social and governance investing and bond portfolio performance, according to a press release.

The new report, called “Sustainable Investing and Bond Returns,” provides an in-depth analysis of the growing trend of responsible investing and a data-driven overview of the returns associated with ESG governance investing in credit markets, Barclays said.

Barclays constructed broadly diversified portfolios tracking the Bloomberg Barclays US Investment-Grade Corporate Bond index. They matched the index’s key characteristics (sector, quality, duration) but imposed either a positive or negative tilt to different ESG factors.

Barclays listed the following key findings:

• The findings show that a positive ESG tilt resulted in a small but steady performance advantage;

• No evidence of a negative performance impact was found;

• ESG attributes did not significantly affect the price of corporate bonds. No evidence was found that the performance advantage was due to a change in relative valuation over the study period;

• When applying separate tilts to environmental, social and governance scores, the positive effect was strongest for a positive tilt toward the governance factor and weakest for social scores;

• Issuers with high governance scores experienced lower incidence of downgrades by credit rating agencies; and

• Broadly similar results were observed using ratings from the two ESG providers considered in this report despite the significant differences between their methodologies.

The study was written by the quantitative portfolio strategy team within Barclays’ investment bank research department.

The Impact Series is designed to explore the social impact of economic, demographic and disruptive changes affecting markets, sectors and society at large, according to the release.

“Investing for social good is no longer simply a morally responsible strategy, it also makes sense from an economic perspective,” Jeff Meli, co-head of research within the investment bank, said in the release.

“Today, investors expect companies to consider the effects of their activities on the global environment and wider society. This inaugural Impact Series report powerfully illustrates the benefits – both social and financial – of an ongoing commitment to ESG investing in credit markets.”

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