ESG and Sovereign Fixed Income Investing: A Better Way

Sovereign Debt
Morgan Stanley Investment Management
I created Morgan Stanley Investment Management’s first Sovereign ESG framework. This paper explains the framework, and the philosophy behind it.

Morgan Stanley Investment Management

Teal Emery

Morgan Stanley Investment Management


October 1, 2019

Image of report cover

Image Credit: World Bank

Download the report here.


As environmental, social and governance (ESG) factors become more broadly incorporated into investment decision-making, sovereign fixed income investors are grappling with the best way to benchmark and quantify these factors across a diverse group of countries. While some may use a simple approach of investing in countries with the highest third-party ESG ratings, we disagree. Instead, we think that this “paint-by-numbers” approach is systematically biased against developing countries, where the potential for ESG improvement is arguably greater, and would result in a pool of low yielding, highly correlated, and geographically concentrated countries. Morgan Stanley Investment Management has developed what we consider to be a better approach.

Citation Information


BibTeX citation:
  author = {Caron, Jim and Emery, Teal},
  publisher = {Morgan Stanley Investment Management},
  title = {ESG and {Sovereign} {Fixed} {Income} {Investing:} {A}
    {Better} {Way}},
  date = {2019-10-01},
  url = {},
  langid = {en}
For attribution, please cite this work as:
Caron, Jim, and Teal Emery. 2019. “ESG and Sovereign Fixed Income Investing: A Better Way.” Morgan Stanley Investment Management.