THE IMPACT OF ESG IMPLEMENTATION ON THE SOVEREIGN BOND YIELD SPREADS : AN EMPIRICAL ANALYSIS OF ASEAN COUNTRIES

• Main Author: Davita Budiarto, Angela
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/71937
• Institution: Institut Teknologi Bandung

Sovereign bond performance is gaining traction in ASEAN countries, but there are challenges, such as high sovereign risk. This can happen for a number of reasons, such as economic downturns, political instability, or ineffective fiscal management. Investors may be less willing to invest in a country's bonds if the country is perceived to have a high bond risk. By maintaining sustainable performance such as implementing ESG can be a solution for lowering risk and gaining investor interest in portfolio diversification. Aggregated ESG scores and bond spreads have a statistically significant relationship using a panel data regression tool, according to the study's findings, with a negative relationship of -0.112 and the component social indicator being the strongest by using principal component analysis. With a significance of 0.033, the relationship between the ESG score and the bond yield spread becomes stronger over time. The authors recommend that countries assess current ESG practices, set ESG targets and goals, develop implementation plans, engage stakeholders, monitor progress, and make changes needed to reduce sovereign risk. This demonstrates a country's commitment to ESG while improving its performance, making it more attractive as an investment destination.