Legal & General Investment Management (LGIM), one of Europe’s largest asset managers, has introduced the L&G Future World ESG Emerging Markets Government Bond Local Currency Index Fund, the first in a series of funds designed to offer investors exposure to an enhanced sovereign ESG (Environmental, Social, and Governance) framework. The series will also include a developed market government bond index fund and a USD-denominated emerging markets government bond fund.
LGIM’s new funds will incorporate a proprietary fourth ESG pillar, “Geopolitical stability/risk,” in addition to various ESG factors. This pillar focuses on identifying risks beyond headline sustainability metrics, providing a more comprehensive risk assessment of investing in government debt.
To address the income bias in sovereign ESG scores revealed by World Bank research, LGIM’s new framework aims to eliminate this bias by encouraging a higher allocation of capital to nations that need debt issuance for economic advancement. The funds will reward countries improving their ESG credentials and penalize those with negative trends.
The fund range will implement “wealth bands” to apply tiered thresholds for exclusions based on different levels of country income, providing investors with exposure to sovereign debt with deeper ESG integration. Additionally, a “sovereign ESG score momentum factor” will reward countries showing positive ESG trends while penalizing those trending downward.
The new funds will use sovereign risk ESG data from Verisk Maplecroft and leverage JP Morgan’s fixed income benchmark methodologies. Categorized as Article 8 under the Sustainable Finance Disclosure Regulation, these funds represent a notable development in integrating ESG principles into sovereign debt investment.
By FCCT Editorial Team
, an independent military force, and allied militias in Sudan raped several dozen women and girls in West Darfur’s capital, El Geneina, and those fleeing to Chad between late April and late June 2023, Human Rights Watch said today. The assailants appear to have targeted people because of their Massalit ethnicity and, in some cases, because they were known activists.){kind=link}