UNEP Report Released: A New Angle on Sovereign Credit Risk, E-RISC: Environmental Risk Integration in Sovereign Credit Analysis

Yesterday, the United Nations Environment Programme released a new report titled, A New Angle on Sovereign Credit Risk, E-RISC: Environmental Risk Integration in Sovereign Credit Analysis (2012). The 40-page report available here, examines five test countries including Brazil, France, India, Japan and Turkey and addresses how,

[l]oss of soils, forests and fisheries, as well as rising resource costs, are likely to become increasingly important to a nation’s economic health, and may affect its ability to repay or refinance sovereign debt, says the study issued by the United Nations Environment Programme’s Finance Initiative (UNEP FI).

The report suggests that factoring the way a country manages natural assets into sovereign bond ratings may not only give investors increased transparency when making investment decisions, but also encourage governments issuing sovereign debt to manage their natural resources more sustainably in order to attract investors over the medium to long term.