Sustainability-linked bonds

: an empirical analysis on ESG score performance

Abstract

Sustainability-linked bonds (SLBs) have recently emerged in the sustainable bond market and are designed to link bond conditions to the achievement of environmental, social and governance (ESG) objectives. The existing literature raises some concerns about the credibility and ambition of those targets set by the issuing firms, reinforcing the need for empirical research on their impact on ESG scores. This research aims to assess if the issuance of SLBs is associated with statistically significant changes in ESG scores and if those changes become statistically significant after some time. This dissertation focuses exclusively on firms that issued SLBs between 2019 and 2022 while analysing the dynamics of scores within SLB issuers. Based on this, we used time variables around the issuance of this instrument (2 years before and 2 years after the issue date) to capture if there is a statistically significant change and when it occurs. The analysis covers firms from different industries and sectors, applying fixed effects models to assess the association between the SLB issuance and the progression in ESG scores while also testing the timing of this effect. The results show that a statistically significant coefficient in ESG scores is only observed in the second year after the bond is issued. These findings indicate that the improvements in the firm's ESG scores after the issuance of SLBs do not occur immediately and become observable over a longer horizon.

Date of Award	31 Oct 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Paulo Alves (Supervisor)