Some of the world’s major rating agencies last June confirmed their willingness to participate in a project to make this vision a reality. Now the PRI is calling on fixed-income investors to sign a Statement on ESG in Credit Ratings before its official launch on Friday, May 6, to be at forefront of this call to action.

As of April 15, 14 investors already have signed on, including MN, an asset owner in the Netherlands and member of our Carbon Disclosure Working Group.

The initial success of this campaign underscores the widespread movement towards integrating environmental risk into investment decisions. A growing number of investors are coming around to realizing what our research has shown: Resource constraints and climate change are material risks that can affect national economies and credit worthiness not only long term but in the short- and medium-term as well.

The PRI makes a similar point in its press release, noting that integrating ESG into credit analysis provides more granular insight into issuer creditworthiness. The PRI further points out that ESG issues such as natural resource management affect government’s tax revenue, trade balance and foreign investment.

Credit rating agencies are a critical part of the world’s US $100 trillion debt capital markets. But currently they are not transparent in how they consider ESG factors. Indeed, 78% of 99 investors surveyed by the PRI believed ESG should be more explicit in ratings.

This new PRI initiative will go a long way toward increasing the systematic and transparent integration of ESG factors into credit ratings. We applaud the PRI for taking this bold, important step, and urge investors and credit rating agencies to endorse it.

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The announcement follows an increasing awareness among investors about the climate change impact of their assets, and their interest in reducing related investment risk. Growth assets, such as sovereign bonds, are among some of the most sensitive to climate risks, especially in emerging markets. With more than $40 trillion of sovereign debt in global markets at any given time, the imperative of understanding the effects of resource trends on nations’ economic health and creditworthiness has risen up the agenda. France is the first country to require institutional investors to disclose the carbon exposure of their portfolios, starting in 2016.

“Global Footprint Network has extensive experience in measuring ecological risks at the country level, specifically as it relates to their incorporation into sovereign bond investments and credit ratings.”

—DR. MAXIMILIAN HORSTER, Director Financial Industry at South Pole Group.

“By leveraging South Pole Group’s experience in cross-asset climate impact assessments, we can together offer clients the possibility to pioneer the reporting of carbon in their sovereign bond portfolios. This partnership is also very much in line with South Pole Group’s constant expansion of climate impact assessments across all asset classes, already including corporate bonds, real estate, private equity, infrastructure as well as direct investments into forestry and agriculture assets.”

Working together, South Pole Group and Global Footprint Network aim to further their common objectives of supporting the wider disclosure of carbon exposure of investor portfolios and mobilising investors and policymakers to act to minimise climate change. Going forward, the two organisations will look to further develop and perfect their methodological approach to the carbon impact assessment of sovereign bonds.

“The tightening global competition for the planet’s resources is becoming an ever more significant factor of national economic performance, yet its influence is still underestimated by most country risk analysts.”

—SUSAN BURNS, Co-founder and CEO of Global Footprint Network.

“We are convinced that environmental and resource risks are material to a nation’s ability to repay its debts and raise new revenues. Building on our strong credentials and data in natural resource accounting, we can, together with South Pole Group, ensure that investors can report on carbon in all asset classes, including sovereign bonds.”

About Global Footprint Network

Global Footprint Network, the leading expert in natural resource accounting, provides forward-looking risk data to fixed-income, banking, insurance and other finance professionals with exposure to country-level risk. With offices in the North America, Europe and Asia, the international think tank   tracks countries’ resource deficits and assesses the risks that they create for national economies—risks that are currently underestimated in many country-risk models and sovereign credit ratings. In addition to its work with the finance industry, Global Footprint Network is the lead organizer of Earth Overshoot Day each year and provides a menu of tools to local and national governments to drive informed policy decisions in a resource-constrained world.

For more information, visit http://footprintnetwork.org or follow Global Footprint Network @EndOvershoot.

About South Pole Group

The Zurich-based South Pole Group began as a project-driven company focused on developing and selling high-quality carbon credits. Today, it is the world’s leading provider of climate solutions. South Pole Group helps public and private sector organisations develop climate proven policies and strategies. Areas of expertise cover every key sustainability-related area of climate change, including but not limited to: forests & land use, water, sustainable cities & buildings, as well as renewable energy and energy efficiency.

For more information, visit www.thesouthpolegroup.com or follow the company @southpolegroup.

Media Contacts:

Ronna Kelly—USA
Director of Communications
Global Footprint Network
ronna.kelly@footprintnetwork.org
+1-510-839-8879
Skype: ronna.kelly.gfn

Nadia Kahkonen
Communications Manager
South Pole Group
n.kahkonen@thesouthpolegroup.com
+66 2 678 8977

The post Global Footprint Network and South Pole Group Join Forces to Offer Climate Impact Assessments for Sovereign Bond Investors appeared first on Global Footprint Network.