Debt & Fiscal Goverance Program : Credit Worthy: ESG Factors and Sovereign Credit Ratings

 

On February 10, EMIA hosted Bryan Gurhy ( Senior Financial Sector Specialist ) and Dieter Wang ( Sustainable Finance Specialist ) from The World Bank, Marie Diron ( Managing Director - Sovereign Risk ) from Moody’s Investors Service and Graham Stock ( Partner ) from Bluebay Asset Management to discuss how sovereign environmental, social, and governance (ESG) factors are manifested in sovereign credit ratings. Many investors believe that improving ESG fundamentals lead to lower sovereign credit risk. However, this view challenges traditional perceptions regarding the key factors that determine sovereign credit risk.

These are the factors that affect debt sustainability. Empirical evidence shows that causation between ESG factors and sovereign credit risk is mixed. Many in the industry expect these two approaches to credit risk to converge. However, this expectation may not be well grounded.

The event was moderated by Fergus McCormick, Director of Sovereign Research at the Emerging Markets Investors Alliance.