Key findings of this report: In investigating the link between ESG and corporate bond performance, Barclays Research 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 research shows that ESG need not be an “equity-only” phenomenon and can be applied to credit markets without being detrimental to bondholders’ returns. • 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 E, S and G scores, the positive effect was strongest for a positive tilt towards the Governance factor, and weakest for Social scores. • Issuers with high Governance scores experienced lower incidence of downgrades by credit rating agencies. • Broadly similar results were observed using ratings from the two ESG providers considered in this report despite the significant differences between their methodologies.