Sustainability alignment in sovereign portfolios

Sustainability alignment in sovereign portfolios

Sustainable investing demand continues to accelerate. For asset managers, investing sustainably requires a new set of tools to uncover attractive investment opportunities.

 

From alignment with long-term sustainability initiatives to identifying securities that may show high resiliency under extreme scenarios, a comprehensive sustainability analysis is key. In fixed income, this exercise goes beyond integrating environmental, social and governance (ESG) criteria into the investment process and reaches much further than just incorporating green or social labeled bonds. Sustainability assessment requires judgement on whether an issuer is actively facilitating long-term growth in a sustainable way for both people and the environment.

 

To investigate how to incorporate sustainability into sovereign portfolios, we conducted research to explore different potential approaches. Sustainable investing in sovereign debt requires an additional set of tools and expertise beyond traditional portfolio management practices. From SDG achievement to sustainability risks and controversies as well as commitment to advancing sustainable growth, identifying sustainable sovereigns requires a comprehensive and tailored process.

 

In this paper, we outline a practical approach to align a sovereign portfolio to specific sustainability goals by combining bottom-up analysis and a holistic, portfolio-level view. We cover different components of the sustainability analysis of countries as well as sovereign engagement, labeled bond assessment and the role of ESG integration in sustainability-themed portfolios. We conclude with two practical examples that reflect our approach to the sustainable assessment process.

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AegonAM_Sustainable_Sovereigns.pdf

(4.75MB) PDF

Jesús Martínez

Senior Portfolio Manager


Irina Kurochkina

Portfolio Manager


Alan Buss, CFA

Senior Sovereign Research Analyst


Emanuele Fanelli

Head of ESG Fixed Income & Partnerships


Sarvjeev Sidhu, CFA

Head of Emerging Markets Strategy


Hendrik Tuch

Head of Fixed Income


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