Advances in Consumer Research
Issue 2 : 174-184
Original Article
ESG Governance and Credit Risk: Evidence from Bank Lending and Bond Markets
1
East Asia University of Technology, Vietnam
Abstract

This paper studies whether stronger ESG governance is associated with lower credit risk across two core debt-financing channels bank lending and bond markets using a global, replicable macro-financial dataset. We frame ESG governance as a risk-governance technology that can reduce expected credit losses by improving transparency, internal controls, enforcement credibility, and institutional resilience. Empirically, we propose a country year panel that combines (i) sovereign ESG governance indicators from the World Bank Sovereign ESG Data Portal, which provides a structured ESG framework with broad country coverage; (ii) banking-sector credit risk outcomes such as nonperforming loans (NPLs) and lending spreads from the World Bank’s World Development Indicators and Global Financial Development Database; and (iii) bond-market credit risk proxies including emerging-market sovereign spreads (EMBI+) available in the World Bank’s Global Economic Monitor (GEM), and benchmark corporate bond yields from the ICE BofA US Corporate Index Effective Yield series in FRED. We outline a baseline fixed-effects estimation strategy with standard macro and debt controls (including IMF Global Debt Database measures) and a set of regime dependence tests capturing institutional complementarity. The paper contributes a unified mechanism linking governance to probability of default, loss-given-default, and risk premia, and provides a transparent roadmap for implementation and replication.

Keywords
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