On the go: The BT Pension Scheme and the Church of England Pensions Board are part of an investors group that is creating a tool to measure, monitor and compare sovereign bonds’ climate change governance and performance.
Commencing work in June 2021, the project team aims to pilot the assessment framework, called Assessing Sovereign and Climate-related Opportunities and Risk, by the end of 2021.
The initiative will then be used to produce an annual public assessment of the climate change governance and performance of sovereign bonds.
According to a statement, the assessments will provide insights that support investors’ research and decision-making, giving them a “sound and cohesive starting point to analyse sovereign debt investments and engage with government officials and policymakers”.
Besides the two pension schemes, the project team developing the tool includes the UN-convened Net-Zero Asset Owner Alliance, the Coalition for Environmentally Responsible Economies, the Institutional Investors Group on Climate Change, the Principles for Responsible Investment, and the Transition Pathway Initiative.
Considering that target-setting frameworks have been evolving — including the IIGCC’s Net Zero Investment Framework and the NZAOA’s Target Setting Protocol — there will be a need for a robust approach to assessing sovereign carbon performance, BTPS said.
Morten Nilsson, chief executive of BT Pension Scheme Management, argued that for “institutional investors wanting to manage their climate risk and achieve net-zero goals, good quality analysis on all asset classes is a must”.
He said: “While significant progress has been made, one asset class that remains a challenge is sovereign debt, which for many institutional investors can form a large part of their portfolios.
“This initiative is seeking to create a way for investors to assess their sovereign debt exposure to these risks and opportunities, and support engagement with international policymakers to drive net-zero action.”
