Legal & General Investment Management (LGIM) has announced the debut of the L&G Future World ESG Emerging Markets Government Bond Local Currency Index Fund.
This latest introduction is part of an initiative to grant investors access to opportunities that embody an advanced sovereign risk ESG framework for evaluating government debt, noted LGIM.
The fund incorporates a proprietary ESG component termed “Geopolitical stability/risk,” broadening the conventional environmental, social and governance criteria. It aims to present a wider scope of risks influencing investment performance.
In response to the income bias in sovereign ESG scores noted by World Bank studies, LGIM’s strategy involves the innovation of ‘wealth bands.’ These bands adjust the exclusion thresholds based on diverse income levels of countries, pursuing a more equitable capital distribution, said LGIM.
LGIM has integrated a sovereign ESG score momentum factor, which incentivises countries displaying positive trends while penalising those with negative trajectories in ESG performance. This feature is designed to intensify risk signals vital to prospective growth in sovereign ESG investment, said LGIM.
The fund series signifies progress in the evaluation of ESG risks within sovereign debt, claimed LGIM. By acknowledging risks beyond surface-level sustainability metrics, correcting for income bias and implementing significant exclusions and adjustments, the funds are committed to investment performance.
Employing sovereign risk ESG data from Verisk Maplecroft, the funds utilise LGIM’s sovereign ESG framework, calculated quarterly and covering roughly 200 countries across all markets.
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