Bond investors who factor ESG criteria into their investments can reduce the likelihood of default, according to a new study by Fidelity International.
The report found that firms with the lowest ESG rankings had a probability of failure two to three times higher than those who came out as ESG leaders.
Graph courtesy of Fidelity International
It also found that companies with high ESG values benefit from lower risk premiums, lower transaction costs, less debt and higher dividends.
However, the study also noted that these companies are not necessarily more profitable than companies who lag behind on ESG criteria.