Co₂liseum transition analytics for sovereigns

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We introduce a new iteration of our Co₂liseum transition analytics system, offering fixed income professionals a systematic, data-driven framework for improving the climate transition profile of sovereign and SSA portfolios. We then apply this methodology to a popular emerging markets government bond fund to show how optimising for climate performance can be achieved. 

The Co₂liseum sovereign scoring methodology synthesises an array of climate indicators, covering quantitative emissions outcomes, forward-looking policy ambition, and real-world energy transition progress in the power sector. We apply this to a universe of 62 countries to produce a final composite score reflecting the net zero alignment of each.

To demonstrate the framework’s utility, we then apply an optimisation on the iShares EMB ETF, one of the most significant emerging market sovereign bond vehicles with approximately USD16bn in net assets. The analysis systematically re-weights country exposures to minimise Co₂liseum score exposure while preserving the index’s core average financial characteristics.

Results across both moderate and high turnover scenarios demonstrate that meaningful reductions in sovereign transition risk are achievable without materially altering the portfolio’s aggregate risk profile.