The Impact of Sustainability on the Corporate Credit Spread: An empirical analysis of the Norwegian and Swedish bond markets

Siri Gulbrandsen & Silje Lien Wold

Student thesis: Master thesis


Over the past 20 years, since the Environmental Conference in Rio de Janeiro in 1992 to the adoption of the Kyoto agreement in 1997, focus on sustainability and corporate social responsibility has become an international trend in business. This increased attention is the background for this paper and the aim of this master thesis is therefore to investigate whether sustainability have any effect when pricing corporate debt in Norway and Sweden. Similar studies have been undertaken in Europe and the U.S, but as far we know no one has examined the relationship between sustainability and the credit spread at issue date in Norway and Sweden. With this master thesis we want to contribute in the research of whether sustainability is profitable by achieving a lower credit spread in the Norwegian and Swedish corporate debt market. To approach the relationship we use the legitimacy theory, stakeholder theory, and triple bottom line. Based on these theories we develop the following research question: Are companies with higher sustainability focus rewarded with a lower credit spread in the Norwegian and Swedish markets? In order to answer the research question we used a quantitative research design, using an Ordinary Least Square regression. The bond information and firm specific information were gathered on 76 different corporations listed on the Oslo Stock Exchange and Stockholm Stock Exchange. These 76 corporations issued together 330 new bonds during the time period from 2003 to 2012. In order to classify whether a corporation is sustainable or not we use the Dow Jones Sustainability Index Europe, launched in collaboration with RobecoSAM. The bond data are gathered from the Norwegian and Swedish Trustee, while the firm specific data are gathered from Thomson Reuters, Datastream, and crosschecked with annual reports. In accordance with Menz (2010), our results are negative but insignificant. The result implies that investors in the credit market do not value the efforts taken by the corporations to become sustainable when pricing corporate debt. We fail in our attempt to prove that a sustainable corporation is rewarded with a lower credit spread.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2013
Number of pages111