Scandinavia Dominates Sustainability Rankings

Shanny Basar

Norway came top RobecoSAM’s latest country sustainability ranking ahead of Sweden, Denmark and Finland.

The Swiss asset manager’s semi-annual report provides environmental, social, and governance profiles of countries using its proprietary tool which collects and analyzes relevant ESG data to calculate an overall country sustainability score. Country coverage has been extended from 65 to 150 countries – 23 developed and 127 emerging market & developing economies.

Robeco said: “The Nordic four along with Switzerland maintain their strong position thanks to leadership in governance, innovation, human capital, and environmental indicators.”

Green bond volumes in the Nordics were 12% of total bond issuance last year, versus 5% globally.

Bram Bos, lead portfolio manager green bonds at NN Investment Partners said in an email last month that 2019 was going to be another record year for new issuance, as the global green bond market surpassed €500bn ($557bn) at the beginning of last month. He expects the market to continue to grow as investment increases in innovation, clean energy and smart cities.

Bram Bos, NN IP

“Corporates will lead this growth, but more sovereign issuers will also launch their green bond programs in 2020,” Bos added. “By the end of 2020, we project the global green bond market to have reached €800bn.”

NN IP said 2019 was the second consecutive year that corporate issuers have dominated with more industrials, communications and technology issuers launching inaugural green bonds.

Credit ratings

RobecoSAM continued that  there is a high correlation between the asset manager’s country ESG scores and sovereign credit ratings, although there are some exceptions. For example, China has strong sovereign ratings despite weak ESG scores.

“Robust sustainability performance helps to promote economic growth and contributes to a healthy fiscal and balance of payments position, and thus to higher long-term sovereign creditworthiness,” added the report.

Country rankings

The report continued that 13 countries, 10 of which are European, achieved an ESG score of 8.0 or higher.

“All top-performing countries have robust, well-balanced sustainability profiles across all three ESG dimensions and have displayed continuously strong sustainability performance since we established our country ESG database in 2006,” added Robeco. “Of the 23 developed countries included in our country ESG assessment, 21 are in the top two ESG categories.”

Only eight of the 127 emerging market and developing countries were in the second-highest category with scores of between 7.0 and 8.0.

“With an ESG score of 7.93, Singapore comfortably maintained its position as the top emerging market country ranking 15th overall,” said Robeco.

The report continued that both the US and the UK have seen their ESG performance gradually worsen since 2016, when the UK voted to leave the European Union and the US for Donald Trump, especially in terms of governance.

“The US has also seen an unprecedented rollback of environmental regulations, and recently Mr. Trump initiated the process of withdrawing from the Paris climate agreement,” said Robeco. “Unsurprisingly, the US’s scores in Yale’s Environmental Performance Index have slumped from 84.7 in 2016 to 70.7 in 2019.”

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