Environmental, social and governance (ESG) factors are material to sovereign creditworthiness and investment performance, according to the Principles for Responsible Investment (PRI).
PRI has released a discussion paper exploring the link between ESG factors and credit risk in the US%47 trillion sovereign debt market. Asset owner such as pension funds invest in sovereign debt because of a perceived lower risk profile – the PRI cites a 2013 study by Towers Watson that found the average pension fund has 34% of its portfolio in fixed income.
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