Getting a credible strategic country and territory-level view of ESG exposure and how this is likely to change provides our clients with an opportunity to engage pro-actively with critical areas of risk and enable effective mitigation. Across 211 countries and territories worldwide, our country and territory-level indicators over 10 years allow users to directly and indirectly:
- Measure & model Sovereign ESG related risks
- Identify Company level exposures to Country and Territory-level ESG
- Benchmark securities & portfolios
- Develop risk control and hedging strategies
- Inform Index and structured product design
- Identify potential trading signals
- Help meet client & regulatory reporting obligations
The 41 discrete indicators encompass the full spectrum of risks encountered by operators focused on the country and territory-level Environmental, Social,and Governance components of ESG. The metrics represent our forecast for these risks over the coming 12 months.
Environmental, social, and governance risks are normally considered at the corporate level. A Sovereign level context for ESG is critical for two reasons:
- The countries and territories a company operates to have a direct impact on a company’s exposure to ESG concerns. Risks are evolving in step with populations, activists, and government’s awareness and engagement with these issues. Credibly evaluating the impact of specific projects on the environment, economy, and social fabric in the host country, territory, and community requires a deep understanding of existing and evolving dynamics.
- Second, ESG risks are no longer just the purview of global equities – these risks are becoming directly relevant to sovereign-level investing. Understanding the issues and dynamics shaping political decision-making, societal pressures and activism helps position not just ESG risks as they manifest today, but also to spot emerging risk in new geographies and sectors.
Sovereign ESG numeration from IHS Markit reflects qualitative analysis and forecasts. IHS Markit’s expert team of macroeconomists and country/territory risk analysts score risks based on their own expert understanding of a country or territory’s political, economic, social, regulatory, and security environment. They draw on in-house macroeconomic forecasting models, information and data from open sources, and structured intelligence gathered by a network of thousands of in-country and territory personnel. Daily written assessments highlight a country or territory’s changing conditions and inform the risk scores. In addition to in-house expertise and models, analysis draws on experts in the field and in-country and territory sources with proven records of reliability. Our wide network of external analysts and contacts gives us access to local, specific, and granular information.