A new investment rating system that aims to provide greater insight into how environmental and social governance can impact a country’s credit rating has put Sweden at number one, followed by Australia.
Scandinavian countries are renowned for their environmental credentials, from significant renewable energy supplies to their love of cycling.
The report, from the Swiss investment group RobecoSAM, ranked 59 countries on a broad range of environmental and social governance issues such as carbon emissions, social cohesion and civil liberties.
The report was designed to provide investors with deeper insight of issues that could affect a country’s credit rating but are not usually considered by traditional sovereign ratings, such as climate change.
Sweden came top of the list, earning high scores across almost all criteria and contrary to many developed countries, also scored well on environmental factors such as the use of renewable energy sources and CO2 emissions.
Australia was ranked second on the list, scoring 7.87 out of 10, compared to Sweden’s 8.25.
The United Kingdom ranked number six on the list, scoring 7.57/10, scoring highly on governance issues, such as how it deals with an ageing population, and six out of 10 for how it deals with environmental risks.
Switzerland landed in third place with a score of 7.83. Denmark, Finland and Norway were also ranked in the top 10.
BusinessGreen reports RobecoSAM said the research found also countries with a stronger sustainability profile tended to have a lower insurance premium.
Johan Duyvesteyn, senior researcher at Robeco Quantitative Strategies, said the report highlighted the value of gathering information on risks related to a country’s sustainability profile, particularly at times when investors are risk averse.
“Our statistical analysis helps us identify which sustainability criteria are financially relevant, which in turn helps us make better-informed investment decisions,” he said.
RobecoSAM said the framework of the study Measuring country intangibles: RobecoSAM’s country sustainability ranking primarily focused on mid- to long-term factors that have an indirect impact on a government’s ability to repay its debt or raise revenue, but that are not considered by traditional sovereign ratings.
Results indicate that a stronger sustainability profile corresponds with a lower insurance premium, suggesting there is added value in gathering information on risks related to a country’s sustainability profile in times of risk aversion.
The study can be found here