Sovereign creditworthiness

The last decade has seen a great deal of intellectual energy spent on the so-called Environmental, Social and Governance (ESG) indicators and their relevance to investing in capital markets. While the bulk of the effort has focused on ESG in a corporate context through equity and corporate bond analysis, we have taken the subject to the level of sovereign creditworthiness, with some surprising results. First off, let us address why ESG matters for government debt. Soft factors such as institutions, governance and social development all matter greatly for a country’s creditworthiness....