Brandywine Global (a Franklin Templeton specialist investment manager) believes environmental factors and risks are not fully reflected in sovereign bond prices or credit ratings.
The acronym ESG, which stands for environmental, social, and governance, was given little attention only five years ago among sovereign bond investors. ESG factors and their potential impact are now a central part of discussions about the economic outlook and in investment research. The initiative to integrate these critical factors into investment management has been led by the United Nations-supported Principles of Responsible Investing (PRI). Signatories to the PRI, including Brandywine Global, commit to responsible investment by adhering to the six principles of responsible investing, including incorporation of ESG factors in investment research.
While our research has led to a greater appreciation of the importance of these factors and their influence on assets—both financial and real—behavior, economies, and policy responses, our sovereign bond analysis has focused largely on governance factors. However, given the global push to reverse climate change, we see the growing importance of E.
To learn more, read our new paper about the analytical tools Brandywine Global uses to assess underappreciated environmental risk factors that could impact sovereign bond prices or credit ratings.