Conclusion: sustainable investing has been beneficial to bond returns All the indications are that the trend towards sustainable In many publicly quoted companies, corporate decision- investing is not only becoming more sophisticated but makers have been forced to balance the long-term also gaining widespread acceptance. ESG has become best interests of their firms against relentless investor an increasingly popular framework for measuring and pressure for short-term earnings growth. The growth managing assets in a way that resonates with the values of the sustainable investing movement can help redress and beliefs held by many asset owners. ESG investing is the balance. As ESG considerations play out over a long now becoming embedded in the investment process of horizon, and as they increasingly become a priority for many institutional investors. company managers, they may help alleviate the pressure While evaluating an investment on Environment, Social for short-termism and rather encourage a focus on long- and Governance dimensions used to be a demanding task, term value creation – to the mutual benefit of the firm, its a number of service providers have emerged that offer ESG investors and the world at large. scores derived using non-financial metrics of corporate performance. Our research into the impact of ESG on the performance “As ESG considerations play out of US investment-grade corporate bonds in the past over a long horizon, and as they seven years has shown that portfolios that maximise increasingly become a priority for ESG scores while controlling for other risk factors have outperformed the index, and that ESG-minimized portfolios company managers, they may help underperformed. The effect was most pronounced for alleviate the pressure for short- the Governance tilt and least pronounced for the Social termism and rather encourage a tilt. Favouring issuers with strong Environmental or Social rating has not been detrimental to bond returns. These focus on long-term value creation – conclusions hold using ESG ratings data from two different to the mutual benefit of the firm, its ratings providers, despite significant differences between investors and the world at large.” the two ratings methodologies. 34