Costs or Benefits of Keeping Decarbonization Promises: Evidence from Corporate-Bond Spreads
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Are firms that are aligned with their climate targets rewarded or penalized by debt markets? This paper investigates whether companies on track to meet their decarbonization targets face higher or lower borrowing costs in the corporate-bond market, compared to peers that are off-track or lack any emission-reduction targets. As investors increasingly incorporate climate-transition risk into credit decisions, understanding how progress on climate targets influences corporate borrowing costs has gained importance for portfolio managers and credit analysts.
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Data as of March 31, 2025. Source: MSCI Climate Targets & Commitments dataset, MSCI ESG Research LLC
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