Integrating the SDGs into government bond strategies

Four Robeco experts on the SDGs, fixed income markets and the sustainability of countries discuss the issue in their new paper, ‘Integrating the Sustainable Development Goals in Government Bond Investment Strategies’. They explain how Robeco’s new Country SDG Framework can be used to determine which countries’ sovereign bonds should be included in investment portfolios that align with the SDGs.

The paper consists of three parts. First, the new framework is introduced. It assesses whether countries have good policies for the SDGs, or need better access to capital in order to finance sustainable development, and whether they respect key sustainability principles. The authors argue that countries meeting these three criteria deserve priority for inclusion in SDG-aligned government bond portfolios.

Secondly, the framework is applied to 170 countries, allowing them to create SDG scores for each one. The resulting scores are different from, but complementary to, the existing Country Sustainability Ranking that scores countries on their environmental, social and governance (ESG) risk profiles.

Thirdly, to show how these scores can be used in practice, the authors create a hypothetical sovereign bond portfolio that aligns with the SDGs. They conclude with the overall implications for sustainable investing and the goals.

The paper was written by SDG Strategist Jan Anton van Zanten; multi-asset specialist Laurens Swinkels; global macro strategist Rikkert Scholten; and Country Sustainability specialist Max Schieler. The working paper is under review for academic publication, but you can read it here first.