Credit Worthy: ESG Factors and Sovereign Credit Ratings
A new report from the World Bank looks at how and which ESG factors apply to sovereign fixed-income assets; and the role of credit rating agencies in assessing materiality.
Our analysis to date highlights the “unique” nature of the sovereign debt asset class from an ESG perspective, largely driven by the complex nature of a sovereign nation, in particular compared to a corporate entity.
This paper focuses on sovereign credit ratings and empirically assesses how broad sovereign ESG factors—as well as the ESG factors specific to a country’s national wealth and management of risks and opportunities related to so-called stranded assets like fossil fuel resources—are manifested in sovereign credit rating assessments.