The SDGs and sovereign bond spreads: investor implications

“A better SDG performance could benefit both governments and institutional investors”

The deadline of 2030 for achieving the United Nations Sustainable Development Goals (SDGs) is fast approaching, and the pressure on governments to meet these targets is intensifying. The implications of not achieving the SDGs could have negative consequences for sovereign bonds. For example, biodiversity loss (SDG 15) could lead to a loss of natural pollination, increased risk of crop failure, and long-term economic losses for countries and investors. This paper analyzes the relation between the SDGs and global sovereign bonds’ credit default swap (CDS) spreads to research whether sustainable development is priced into the sovereign bond market.

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Key Takeaways for the Industry

• There is a potentially important relation between sustainability and CDS spreads. Better SDG performance could benefit governments financially, socially and ecologically.
• Investing in sovereign bonds of countries that invest in sustainable development can benefit investors, allowing impact investing to extend into sovereign bond strategies.

Want to know more?

Read the paper The SDGs and sovereign bond spreads: investor implications from Eline ten Bosch, Mathijs van Dijk and Dirk Schoenmaker (Erasmus University).

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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