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The Barclays Social Innovation Facility Launches Impact Series, With First Report Measuring Impact Of ESG Criteria On Credit Portfolio Performance

Study shows a positive link between high-ESG corporate bond portfolios and returns, contrary to popular belief 

Barclays Bank PLC (“Barclays”) today released the first report in a new Impact Series from The Barclays Social Innovation Facility, showcasing groundbreaking research into the relationship between Environmental, Social and Governance (ESG) investing and bond portfolio performance.

The new report, titled Sustainable investing and bond returns, provides an in-depth analysis of the growing trend of responsible investing, as well as a data-driven overview of the returns associated with ESG investing in credit markets. The study was authored by the Quantitative Portfolio Strategy Team within Barclays’ Investment Bank Research department.

“If ESG attributes are aligned with bond returns as our study suggests, we can expect the move to sustainable investing to endure,” comments Barclays Chief Executive Officer Jes Staley in the foreword to the report.

“Investing for social good is no longer simply a morally responsible strategy, it also makes sense from an economic perspective,” said Jeff Meli, co-Head of Research within the Investment Bank at Barclays. “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.”

The Impact Series is designed to explore the social impact of economic, demographic and disruptive changes affecting markets, sectors and society at large. Key findings of today’s report include:

  • Bond portfolios with high ESG scores have outperformed low-ESG portfolios with matching risk attributes in the past seven years
  • This return advantage is particularly pronounced for portfolios with high Governance scores
  • No evidence was found that the performance advantage was due to a change in relative valuation of high ESG bonds compared to their peers
  • Bonds with high Governance attributes were subject to fewer credit downgrades than their peers with poor Governance scores
  • Using ESG ratings from two different providers that follow different scoring methodologies led to broadly similar conclusions about the relationship between these ratings and credit portfolio performance

The Barclays Social Innovation Facility is a catalyst for the development of innovative products and services that deliver both an ongoing commercial return and a sustained social impact. It was launched in 2012 and is a key part of the firm’s Shared Growth Ambition.

Barclays is a transatlantic consumer, corporate and investment bank offering products and services across personal, corporate and investment banking, credit cards and wealth management, with a strong presence in our two home markets of the UK and the US. With over 325 years of history and expertise in banking, Barclays operates in over 40 countries and employs approximately 130,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide.

Get a snapshot of what ESG is and how it is changing the investment ecosystem.