Sustainability as a Leading Indicator for Credit Events
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We examine whether sustainability data can help identify corporate bonds at risk of adverse credit events. Analyzing 10.5 years of data across more than 21,000 bonds, the research found that issuers with lower MSCI ESG Ratings were significantly more likely to experience events such as downgrades or spread widening, with results consistent across both investment-grade and high-yield markets. The findings suggest that incorporating sustainability data into credit-risk frameworks can enhance portfolio construction and early risk detection.
The analysis is based on monthly data between January 2015 and June 2025. The orange dotted line shows the median time (in months) in which an affected bond experienced a credit event, blue dotted line the median number of months a bond was included in the bond universe and purple dotted line the median time to maturity of the bonds in the universe. Source: MSCI ESG Research
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