https://www.sageadvisory.com/media-assets/a-framework-for-sovereign-esg-risk-assessment/
Even though government debt represents approximately 41% of the $255 trillion global bond market, the level of vigor in Environmental, Social, and Governance (ESG) analysis that is applied to the issuer is not always the same as it is in the corporate space. Sovereign debt, which is issued by central governments, is particular- ly vulnerable to a lack of adequate ESG assessment. It is often passed off as a risk-free asset meant for capital preservation and stability, especially in the case of developed countries’ debt issuance, but events of the past two decades have showcased the need to rethink this notion. Greece struggled mightily after the 2008 fi- nancial crisis, requiring bailouts from the International Monetary Fund, European Central Bank, and the Euro- group, and lenders still took a huge hit on defaulted loans. And possibly even worse, Argentina (on the cusp of being classified as a developed country) has been engulfed in a debt crisis for the past 20 years, and creditors continue to get punished for holding its debt, with no real viable solutions moving forward.
