Publication:
A New Dawn: Rethinking Sovereign ESG

Abstract
Environmental, social, and governance (ESG) investing is quickly becoming ordre du jour in sovereign debt investing. There remains, however, lack of clarity around frameworks for scoring sovereign ESG performance, industry practices, and the definition of sustainability itself. This World Bank publication consists of two independent reports. The first part is written by the World Bank and takes stock of the current sovereign ESG investing framework and proposes improvements. The second part presents a survey on ESG practices among emerging market (EM) sovereign debt investors conducted by J.P. Morgan (JPM), which launched the first EM sovereign ESG index in 2018. This publication is a result of the World Bank's proactive engagement with stakeholders on pertinent sovereign ESG issues and is part of a publication series under the auspices of the Global Program on Sustainability (GPS).
Link to Data Set
Citation
Gratcheva, Ekaterina M.; Gurhy, Bryan; Emery, Teal; Wang, Dieter; Oganes, Luis; Linzie, Jarrad K.; Harvey, Lydia; Marney, Katherine; Murray, Jessica; Rink, Rupert. 2021. A New Dawn: Rethinking Sovereign ESG. Equitable Growth, Finance and Institutions Insight;. © World Bank. http://hdl.handle.net/10986/35753 License: CC BY 3.0 IGO.
Associated URLs
Associated content
Report Series
Other publications in this report series
Journal
Journal Volume
Journal Issue

Related items

Showing items related by metadata.

  • Publication
    Demystifying Sovereign ESG
    (World Bank, Washington, DC, 2020-12-31) Gratcheva, Ekaterina M.; Emery, Teal; Wang, Dieter
    The evolution of sustainable finance to mainstream finance has been motivated by a growing demand for the financial sector to play a greater role in the transformation of the current economic model into a more sustainable one. The introduction of the United Nation’s (UN) Sustainable Development Goals and the Paris Agreement on climate change in 2015 have helped galvanize a societal shift to ensure a sustainable future and to fight climate change in particular. As a result, the pace of environmental, social, and governance (ESG) integration, which has become the most prevalent form of sustainable finance, has accelerated in recent years. Market participants continue to grapple with adapting the ESG framework to the sovereign context, despite significant progress of ESG integration in the corporate bond and equity asset class. This challenge is due to the multifaceted nature of ESG-related issues facing governments in relation to corporate entities, as well as a more complex transmission mechanism of the sovereign debt asset class to sustainable outcomes in the real economy. This paper demystifies sovereign ESG as a distinct segment of the ESG sector by assessing the major sovereign ESG providers that have laid the foundation for the operationalization of ESG investing in sovereign fixed income markets.
  • Publication
    Credit Worthy
    (World Bank, Washington, DC, 2022-01) Gratcheva, Ekaterina M.; Gurhy, Bryan; Skarnulis, Andrius; Stewart, Fiona E.; Wang, Dieter
    The increasing role of the financial sector in the move toward a more sustainable economic model continues apace. The Coronavirus (COVID-19) shock shone a light on the need for all society to correct course, and the financial sector is responding. The pace of environmental, social, and governance (ESG) integration into investment decisions, which has become the prevalent form of sustainable finance, continues to accelerate. These developments reflect changing societal perspectives that challenge the traditionally ingrained investment approaches that have evolved over many decades. Against this backdrop, various financial sector stakeholders continue to evaluate how their role, products, and tools should adapt to this evolving landscape. 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.
  • Publication
    The Potential Implications of Economic and Social Rights for Sovereign Debt Investing
    (World Bank, 2023-05-24) Gratcheva, Ekaterina; Gurhy, Bryan; Wang, Dieter; Brook, Anne-Marie; Clay, K.Chad; Randolph, Susan
    This paper discusses both the relevance of economic and social rights (ESRs) for environmental, social, and governance (ESG) investing in the sovereign debt asset class and how to start incorporating these rights into the investment process in a practical way. Many in the investment industry recognize the potential role that investors can play in influencing a country’s decisions on environmental and social issues, including human rights. Investors are also increasingly acknowledging the potential to influence a sovereign’s actions on social issues, such as ESRs, given the state’s direct role in providing a pathway to social advancement for its citizens. The rest of this paper is organized as follows. Section 2 explains the relevance of ESRs to the sovereign debt asset class. Section 3 introduces the income adjusted ESR dataset, and section 4 illustrates the insights that this dataset can provide for sovereign debt investors. Section 5 provides one practical example of how sovereign debt investors could use such a dataset in practice. Section 6 presents our conclusions.
  • Publication
    Paving the Path
    (World Bank, Washington, DC, 2021-05-24) Boitreaud, Sebastien; Emery, Teal; Gonzales, Luis; Gurhy, Bryan; Larrain, Felipe; Paladines, Cindy
    Climate risks are on the rise globally. For emerging market countries such as Chile, these risks can manifest as an increased propensity for drought, wildfires, flood events, and landslides. As a result, governments are increasingly prioritizing policy solutions that will support an economic transition to mitigate the impact of climate change while also supporting households and communities as they adapt to the changing risk landscape. The financial sector is playing a key role in supporting a just economic transition. For many emerging market countries, the sovereign is the largest issuer of domestic debt, and the instruments and issuance path they choose can be key toward influencing downstream financial sector activity. For their part, global investors are becoming more attuned to the environmental, social, and governance (ESG) factors that underpin sovereign debt instruments. This report explores Chile’s sovereign issuer options, opportunities, and challenges through the lens of its recent decisions to issue green, social, and sustainable debt instruments.
  • Publication
    Riding the Wave
    (World Bank, Washington, DC, 2020-10-22) Boitreaud, Sebastien; Gratcheva, Ekaterina M.; Gurhy, Bryan; Paladines, Cindy; Skarnulis, Andrius
    The world is on an unsustainable path. Financial sector participants are becoming more conscious of the impact of their economic, social and environmental footprint. As the investor community makes progress towards integrating environment, social and governance (ESG) factors into investment mandates, particularly for equities and corporate debt, integrating these factors into the sovereign debt asset class has lagged- although investment practices and approaches are evolving. As the financial ecosystem changes, the Debt Management Office (DMO), as the main financing arm of the state, would benefit greatly from understanding how these changes affect the core Public Debt Management (PDM) mandate and how to respond to the growing investor demand for sustainable finance. The paper presents an overview of areas in which DMOs can respond to the changing world and proposes six ESG market readiness factors as well as a framework to help formulate DMO strategy in the area of ESG investing. The paper also concludes that in less developed markets, given weak institutional arrangements, it is often better to concentrate development efforts on the local capital market as this will ultimately support a more sustainable economy in the long run.

Users also downloaded

Showing related downloaded files

  • Publication
    Argentina Country Climate and Development Report
    (World Bank, Washington, DC, 2022-11) World Bank Group
    The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.
  • Publication
    Classroom Assessment to Support Foundational Literacy
    (Washington, DC: World Bank, 2025-03-21) Luna-Bazaldua, Diego; Levin, Victoria; Liberman, Julia; Gala, Priyal Mukesh
    This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.
  • Publication
    Lebanon Economic Monitor, Fall 2022
    (Washington, DC, 2022-11) World Bank
    The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banks’ shareholders) that protects small depositors.
  • Publication
    World Development Report 2006
    (Washington, DC, 2005) World Bank
    This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.
  • Publication
    The Journey Ahead
    (Washington, DC: World Bank, 2024-10-31) Bossavie, Laurent; Garrote Sánchez, Daniel; Makovec, Mattia
    The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECA’s demographic and socioeconomic disparities. Yet, migration’s full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migration— forced displacement as well as high-skilled and low-skilled economic migration—and from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.