Robeco has published a roadmap detailing how investors can engage with countries and advance SDGs. Work towards these global goals has already begun with Brazil and Indonesia addressing deforestation.
On 2 June Robeco published a framework, in the Journal of Sustainable Finance and Investment, mapping out methods to help investors engage with governments on their countries’ SDG performance.
Governments also have good reasons to work with the investors who buy their sovereign bonds as it means they can get better access to finance and to sustainability expertise.
Sovereign bond values are partly determined by the sustainability credentials of a country – including for example its record on deforestation – making it in the country’s interest to raise its score.
One of the first countries to do so was Brazil, whose vice president met with a group of 34 investors in July 2020 to discuss concerns about deforestation in the Amazon rainforest. Engagement work has now begun with Indonesia, focused on unsustainable palm oil.
Robeco sustainability experts have co-authored a Sovereign SDG Engagement Framework, explored in their article, ‘Sustainability integration for sovereign debt investors: engaging with countries on the SDGs’.
The framework seeks to answer three key questions: who to engage with, what to engage about, and how to conduct the engagement itself.
First, countries are prioritized based on relevance in the investment universe and portfolios and the country’s progress on the SDGs.
Second, SDG targets facing slow progress within that country are identified as priorities to engage on.
Third, a systematic process for conducting the engagement itself is provided. This includes goal setting, finding partnerships in the process, reporting and monitoring progress.
Playing an important role
Rikkert Scholten, portfolio manager within Robeco’s fixed income team, comments, “There is an important role for us to play as sovereign bond investors in supporting the advance of SDGs. The new engagement framework is an essential step in shaping that task.”
Peter van der Werf, Senior Manager for Engagement at Robeco, adds, “Sovereign engagement is the next frontier in active ownership and our conversations with the government of Brazil and Indonesia as part of the Investor Policy Dialogue on Deforestation (IPDD) are starting to bear fruit.
“These talks can develop into structural contributions to policy making with the aim of reducing deforestation to protect biodiversity.”