We observe the following factors when assessing government bonds from a sustainability perspective: political practices, government strength, social development, economic and financial stability, ability to withstand external shocks, and willingness to reform. An absolute lower score in any single factor does not always translate into excluding an investment. Instead, we focus on longer-term development and trends, whether they are positive or negative. Through instrument selection we can decide whether we are willing to finance a specific government or not.
Within Emerging market sovereign debt, our strategies have a macroeconomic and fundamentally driven approach with ESG integrated process. Long-term investment horizon is based on country selection with combined qualitative and quantitative decision-making process. With our in-house quantitative model (consisting of around 30 indicators), we monitor the level and the development of economic, political and social factors (environment and climate change risk are included in social component). In addition, we analyze countries based on their performance in UN’s sustainable development goals (SDG) and other broad ESG data sets. A weak development in ESG factors can lead to a situation where country is excluded from our investment portfolios or we are not willing to finance the government.