The Sovereign Transition to Sustainability

Authors :
Alexandra Pinzón and Nick Robins with Matthew McLuckie and Gabriel Thoumi
Organisation:
London School of Economics and Political Science (LSE), Grantham Research Institute on Climate Change and the Environment

The transition to sustainability is the strategic challenge sovereign bonds face in the 2020s. Overcoming this challenge requires that the financial system recognises the fundamental economic dependencies on nature, which are currently ignored and mispriced, storing up instabilities for the future. This report examines the case for the structural inclusion of natural capital into the issuance, assessment and stewardship of sovereign bonds, with a particular focus on Argentina and Brazil. The authors focus on a hitherto overlooked aspect: the importance for sovereign bonds of reliable flows of ecosystem services from land. How successfully the world transitions to a sustainable economy will impact on countries that rely on land-based natural capital for their economy. The report, the Sovereign Transition to Sustainability, is the first in a series that will aim to understand the relationship between natural capital and the future prospects for sovereign bonds and it is anticipated that it will encourage stakeholders in the sovereign bond market to analyse further alternatives to assess and incorporate natural capital into their decision-making.

Countries :