Environmental, Social and Governance (ESG) is increasingly taken into
consideration by financial and institutional players, yet it is still not integrated
systematically in sovereign risk analysis. Recent efforts, like the United
Nations’ UN-PRI initiative, or the BIS’ Green Swan reports, have taken up the
issue to highlight the importance of the ESG and Sustainability viewpoint.
This paper lays out a methodology that integrates holistically, and objectively,
ESG performance and traditional economic and financial metrics in the
sovereign risk analysis. Developed by the London Stock Exchange Group’s
Beyond Ratings, Sovereign Risk Monitor (SRM) is a proprietary methodology
that uses systematic analysis to offer a rigorous assessment of sovereign risk.
SRM includes 69 indicators of sovereign creditworthiness from 146 economies
assessed quarterly, within a statistical and econometric framework.
