Sovereign bond climate risk initiative to reduce number of indicators in framework

The Assessing Sovereign Climate-Related Opportunities and Risks (ASCOR) investor initiative will reduce the number of indicators in its framework as part of a post-consultation update, according to a progress note. 

Formed in 2021, the project is a collaboration between a $5 trillion investor coalition and a series of investor groups including the PRI, IIGCC and Net Zero Asset Owners Alliance. It is tasked with developing an internationally agreed framework for assessing sovereign issuers on climate and improving the quality of data available. 

In February it launched a pilot framework for consultation that revolved around nine indicators, spread across the categories of emissions pathways, climate policies and opportunities to finance the transition.

Sovereigns are assessed against each indicator on a series of yes/no and data metrics. Results for each indicator in the first two categories will be presented as a yes, no or partial alignment, based on the approach of the Climate Action 100+ benchmark. However, the results of the assessment will not be aggregated into one overall score. 

According to the progress note, published earlier this week, the majority of respondents agreed with the framework’s design approach and the proposed themes and indicators.

But one key point to come out of the consultation responses was the need to streamline the analysis on sovereign climate performance “by limiting the number of indicators while still providing a comprehensive overview”, according to the note.

The feedback noted, for example, that there was some overlap between proposed indicators, a spokesperson for the initiative told Responsible Investor. 

They explained the main rationale behind the move to reduce the number of indicators is to improve the tool’s usability and practicality for investors, “which is a point that was indeed highlighted in some of the feedback we received”, as well as the need to ensure “realistic assessment data delivery”. 

When asked which indicators might be dropped or revised, the spokesperson would not be drawn on the specific indicators as the draft framework is still subject to amendments. But they said: “we are prioritising the indicators that would add the most value to the tool or make it complementary to other existing resources that can help frame climate change in sovereign analysis.”

The Transition Pathway Initiative (TPI) Global Climate Transition Centre – ASCOR’s academic partner – is working to incorporate feedback from the consultation into an updated framework. This includes revising down the number of indicators in collaboration with the ASCOR Advisory Committee.

The updated ASCOR framework and assessment results for 25 countries will be published by the end of 2023. 

On the potential to expand country coverage, the note said this is currently under discussion in the ASCOR Steering and Advisory Committees.  

And based on “conversations to date and contingent on future funding”, the intention is to expand to 70 countries over the coming years, and subsequently to more than 100 countries.

These coverage levels have been guided by the aim of assessing all countries in the major sovereign bond indices. Coverage may be expanded further to include countries that do not yet issue sovereign bonds but have significance to international bond investors.