New report by WWF and Investec Asset Management reveals innovative environmental risk approaches for sovereign bond investors

Advances in geo-spatial data and satellite imagery could help sovereign debt investors better assess and manage environmental risks — and may contribute to setting the global economy on a sustainable footing, says a new report by WWF and Investec Asset Management

Investors in sovereign debt have an opportunity to help put the global economy on a sustainable path, according to a new report by WWF and Investec Asset Management.

‘Satellites and sustainability: New frontiers in sovereign debt investing’, published today, explores how new research techniques relating to the application of spatial data in finance are transforming the ability of sovereign-debt portfolio managers to assess environmental risks.

The report argues that the insights obtained from such techniques could be used not only to manage investor risk, but also to encourage sovereign issuers to adopt fiscal agendas that serve both people and the planet. The research adds to the emerging field of spatial finance, which brings together geospatial data, earth observation such as satellite imagery, and financial analysis.

‘Satellites and sustainability’ examines how spatial data – including satellite imaging – could enhance investors’ understanding of environmental risks at the country level. The report outlines that:

• The destruction of nature poses risks to national economies, and consequently countries’ ability to repay debt; therefore, sovereign bond investors need to address environmental risks in their portfolios;

• Analysis of geo-spatial data and satellite imagery will increasingly allow investors to obtain more accurate and timely assessments of environmental degradation;

• This will enhance investors’ ability to evaluate and monitor environmental risks, and facilitate their engagement with sovereign issuers in encouraging the adoption of fiscal agendas that deliver for people, investors and the planet

Ray Dhirani, Head of Sustainable Finance and Green Economy, WWF-UK, said: “We are the first generation to know we are destroying our planet and the last one that can do anything about it. Sovereign debt investors are uniquely placed to help in the fight for our world, through a robust and comprehensive integration of environmental considerations into their investment and government engagement strategies.”

Peter Eerdmans, Head of Fixed Income, Investec Asset Management, said: “There is mounting evidence that environmental factors can shape the destinies of national economies and materially influence sovereign debt portfolios. Spatial analysis has the potential to transform the way sovereign debt investors address the risks and opportunities arising from the stresses on the natural world.”

For access to the full report, click here