Sustainable finance has seen rapid evolution, particularly in recent years, influenced by geopolitical events, regulatory scrutiny and advancements in understanding ESG impacts. Amid this dynamic environment, asset owners are increasingly adopting sovereign ESG approaches for investing in sovereign bonds, using these investments to drive productive and transformative changes.
This paper evaluates the progression of the sovereign ESG provider landscape since the initial comprehensive assessment in 2021. By conducting a comparative analysis of methodologies from seven leading ESG providers, it addresses key issues such as the ingrained income bias, the divergence in environmental scores, and the conflation of risk and sustainability goals.
The paper also seeks to provide insights into the complexities of implementing sustainable strategies in sovereign debt investments and to highlight areas for improvement in sovereign ESG scoring methodologies.