Sovereigns and central banks

The Reformed SSA Trader: High ratings, high risks

Written by Ulf Erlandsson

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Australia, Austria, and the Canadian Province of Alberta should be on the radar for SSA investors with transition and climate policies. Each in their own way pose heightened risks to investors given recent political and policy developments, and especially when considering labelled bond issuance and/or sustainability dedicated fund allocations.

Australia in June issued a green bond in support of the sovereign’s climate goals. However, the government has since elected to extend the life of several coal mines, placing these goals in jeopardy and tarnishing the green bond, which has underperformed since issuance.

Austria’s new parliament, where a climate-sceptic party holds the balance of power, threatens to weaken the country’s already insufficient climate policies and undermine the impact of its own green bonds.

Meanwhile, Alberta’s strong backing of oil, gas, and tar sands clashes with the ESG commitments of funds that supported its recent EUR-denominated bond sale.

This research note unpacks the distinct climate-financial risks that each of these issuers could bring to unwary investors, and serves as a reminder that corporate bonds are not the only instruments that should be scrutinised by climate-aware asset owners.

About the author

Ulf Erlandsson

Ulf Erlandsson

Founder, Board member

Dr Ulf Erlandsson founded the Anthropocene Fixed Income Institute and was its first CEO. A pioneer of climate-focused fixed income portfolio management, he was named Environmental Finance’s Bond Personality of the Year 2022.

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