KBRA publishes study – Sovereigns: KBRA’s framework for integrating ESG risk management into credit ratings
NEW YORK–(COMMERCIAL THREAD) – Kroll Bond Rating Agency (KBRA) publishes a study on our approach to integrating environmental, social and governance (ESG) factors into the credit rating process for sovereigns.
Key points to remember
Climate change is a primary factor that can affect many sectors of a state’s economy and can influence the debt sustainability of some states. In the long term, it can lead to a decline in potential growth and a displacement of human capital or, conversely, create economic opportunities for some sovereigns.
A sovereign state’s management of social risks that arise from stakeholder preferences can become an important scoring factor as its policies affect trade, investment, access to capital, economic growth and fiscal dynamics. . Managing these risks can also influence political stability and security risks, which are often focal points for private investment.
Highly concentrated economies may be more vulnerable to cybersecurity attacks against key industries. It is important to note that the richer or more institutionally advanced economies do not always have more sophisticated practices for managing cybersecurity risks; all sovereigns can be at risk and must actively manage their exposures.
KBRA believes it is essential that all rulers learn from the challenges of the COVID-19 pandemic and prepare for future epidemics.
Click here to view the report.
KBRA is a full service credit rating agency registered in the US, EU and UK, and is designated to provide structured finance ratings in Canada. KBRA ratings may be used by investors for regulatory capital purposes in several jurisdictions.