ESG and Sovereign Fixed Income Investing: A Better Way
Teal Emery 
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Abstract
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
Citation
@report{caron2019,
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 = {https://www.morganstanley.com/im/publication/insights/investment-insights/ii_esgandsovereignfixedincomeinvestingabetterway_en.pdf},
langid = {en}
}