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Investment sustainability analysis being used to assess countries



Investment groups are responding to the increasing awareness of sustainability opportunities and risks by not only assessing businesses on environmental, social and governance (ESG) factors but also countries.

The sustainability of a country can have a huge impact on the businesses operating in the region. For example, water-intensive industries would suffer if they operated in water-stressed areas and social issues, such as inequality, can have an impact on workforce productivity.

Speaking to Citywire Global, Matt Christensen, head of responsible investment at AXA Investment Managers, said, “Investment groups are using sustainable analysis to inform their overall asset allocation and help decide which countries they should be backing.

“In response to demand we’ve developed a framework to look at individual countries, which uses data from existing sources like the World Bank, OECD and others to home in on education, healthcare, social issues, governments’ carbon footprints and the scope of resources management.”

He explained that information can be broken down into “manageable chunks” so investors can focus on specific areas of a country’s social and financial health to complement their decision-making process.

Christensen also noted that some clients are interested in looking at the reputational risk they face by investing in certain countries, whilst others take a traditional approach and bring in standard financial metrics.

This week, 207 major cities from around the world warned that climate change presents a very real, physical risk to the businesses that operate within them. The report highlights why it is important for investors to consider where the businesses they invest in are located.

Christensen names Scandinavian countries, and in particular Denmark, as the leaders when it comes to ESG analysis. Separate research, published last year, named Sweden the world’s “most sustainable” country after ESG analysis, with Scandinavian countries scoring highly.

Photo: Simen Schikulski via Flickr   

Further reading:

Sweden named world’s ‘most sustainable’ country after ESG analysis

Breaking the eight myths of sustainable and responsible investment

63% of UK investors want to be offered sustainable investment options

What leading investment houses say about sustainable investment

The Guide to Sustainable Investment 2014