MSCI ESG Sovereign Ratings
 |
MSCI ESG Sovereign Ratings identify a country’s exposure to and management of environmental, social, and governance (ESG) risk factors and explain how these factors might impact the long-term sustainability of its economy. By providing a long-term view on sustainability the ratings aim to complement traditional sovereign debt analysis of a country’s credit worthiness. |
Each country faces many ESG-related risks. MSCI ESG Sovereign Ratings assess a country’s management of these risks. ESG risk management has an important bearing on the long-term competitiveness and sustainability of a country’s economy and, in turn, the attractiveness of the country as an investment destination.
MSCI ESG Sovereign Ratings provide an overall sustainability assessment of 90 countries covering Developed, Emerging and Frontier Markets, and containing historical time series results of over 5 years. They offer unique matching capabilities by containing a new and improved file matching more than 14,000 bond issues. Coverage is designed to provide ratings on 99% of sovereign bonds issued in the marketplace; countries that do not issue securities or whose debt is thinly traded are not rated. MSCI ESG Sovereign Ratings score and rate countries on a seven point scale from ‘AAA’ (best) to ‘CCC’ (worst). Ratings are derived from 0-10 scores on underlying factors in three pillars: Environmental, Social, and Governance.
Integrating ESG into the investment process is the first principle for UN Principles for Responsible Investment (UN PRI) signatories and is increasingly being mandated and scrutinized by asset owners. Institutional investors require coverage of their core portfolios of equities and bonds and MSCI ESG Sovereign Ratings are a critical tool to integrate ESG research into their fixed income portfolios.
MSCI also provides a set of screening factors for each country which allows investors to assess the profile of a country’s status with respect to various values- and mission-based issues and controversies, such as child or forced labor and armed conflicts, and whether the country is a party to international conventions related to endangered species, biological diversity, chemical and biological weapons.
In addition, MSCI ESG Sovereign Ratings include a custom weighting feature to allow clients to incorporate their own views about the impact of different ESG risk factors on country ratings and ranking.