S&P ESG Sovereign Bond Index Family

The S&P ESG Sovereign Bond Index family is offered jointly by RobecoSAM Indices and S&P Dow Jones Indices. These indices offer investors exposure to the same sovereign bonds as standard cap-weighted sovereign bond indices but tilt the country weights towards more sustainable countries, based on RobecoSAM’s Country Sustainability Ranking.
 
By incorporating country sustainability analysis, the S&P ESG Sovereign Bond Index family seeks to address a key weakness of standard cap-weighted bond indices: the fact that they are overly exposed to highly indebted and therefore risky countries.

Country sustainability analysis offers a view into a country’s underlying change drivers and offers investors insights into a country’s strengths and weaknesses on a broad selection of environmental, social and governance factors. It primarily focuses on mid to long-term factors that have an indirect impact on a government’s ability to repay its debt or raise revenues, but that are not considered by traditional sovereign ratings. Such factors reveal potential opportunities and threats faced by countries and that are not typically covered by rating agencies. Being aware of countries’ structural flaws or strengths can help investors make better-informed investment decisions.
 
 
The index approach
The index uses the underlying S&P Sovereign Bond Index as a starting point and shifts of the country weights depending on each country’s ESG profile. The country’s ESG profile consists of the country’s Sustainability Score from the Country Sustainability Ranking, which is weighted at 75%, and the annual change of the Sustainability Score, which is weighted at 25%. The annual change of the Sustainability Score is incorporated into the ESG profile used to tilt the country weights because our financial analysis has shown that a change in a country’s Sustainability Score can be good predictor for a country’s CDS spreads over the coming 12-month period.
 
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Overview of Index Range
The S&P ESG Sovereign Bond Index family was launched with the S&P ESG Pan-Europe Developed Sovereign Bond Index and will be extended to other global regions including emerging markets.


 

The S&P ESG Pan-Europe Developed Sovereign Bond Index is based on the universe of sovereign bonds issued by countries in the developed Europe region. For each country in the universe, RobecoSAM calculates a country Sustainability Score on a semi-annual basis.

For more information on the S&P ESG Pan-Europe Developed Sovereign Bond, please see the