Does Sustainability Reduce Country Default Risk?
Résumé
Using the CDS premium as a proxy for default risk, and studying 41 countries rated bythe social rating agency Vigeo, we show that higher country social ratings are associated with lower sovereign default risk. From the credit rating and the sustainableVigeo scores we highlight three independent components called social, environmentaland economic dimensions. The most valuable information for appraising sovereigndefault risk comes from the environmental and the economic dimensions. By referringto a Choquet integral methodology, we aggregate these two dimensions in an overallscore which better explains country default risk than the credit rating taken alone.