Country Sustainability Ranking shows shifts in Europe

Country Sustainability Ranking shows shifts in Europe

06-12-2016 | リサーチ

Recently, the semi-annual update of the RobecoSAM Country Sustainability Ranking was released. It shows some notable shifts in Europe.

  • Max Schieler
    Senior Country Risk Specialist at RobecoSAM
  • Rikkert  Scholten
    Portfolio Manager

Speed read

  • Scandinavian trio slightly ahead of Switzerland
  • Turkey on a deviating path
  • Italian ESG score declines

Many countries’ sustainability performance is under continued strain due to persisting social tensions and heightened political risks. The latter have also been highlighted as the biggest threat to the global economy in the IMF’s latest World Economic Outlook. As we already suspected in the April 2016 update, such an environment has, of course, not remained without ramifications for country risks in a broader sense.

The Figure below shows the latest Country Sustainability Ranking. The new ranking puts Norway at the top, with Sweden and Finland completing the podium and Switzerland running a close fourth.

Figure  1  |  Country Sustainability Ranking October 2016


Source: RobecoSAM

The UK drops

Not surprisingly, the United Kingdom had a major shift in rank and was relegated from 4th place to 12th. The Brexit vote has left a highly divided country and could well lead to political and social tensions. However, the real effects of Brexit will only be seen once the nature of the new relationships with the EU are known. The UK will most likely be forced to adapt its growth model, but can at least count on a robust and balanced sustainability profile that should facilitate this task. Its governance performance surpasses many of its European counterparts. On the other hand, income inequality is relatively high and may have contributed to widespread frustration and the success of the Brexit campaign.

Shifts in the European periphery

Ireland’s ESG performance is still above average, even though it had to cede its top position within the EMU peer ranking, with a drop to position 4. Reason is the inclusion of new data on pension assets, which improves the score on aging for countries such as Finland and the Netherlands. Still, the score remains strong at 7.2, which is a full point better than for instance Spain.

The score is weaker on energy dependence, but the country benefits from a robust governance framework and enjoys a favorable political and social climate, which is reflected in leading positions on political risk, social stability, corruption and social progress. Ireland also enjoys a well-developed welfare system that has not only helped to maintain social cohesion, but also its readiness to accept painful and needed structural reforms. This, in turn, has contributed to Ireland’s remarkable recovery from the financial crisis and its status as the euro area’s growth leader during recent years.

Figure  2  |  ESG scores for EMU countries

Source: RobecoSAM

Within the euro periphery we continue to prefer Ireland from an ESG perspective. In funds such as Robeco Euro Government Bonds we have recently increased investments in Irish government bonds after a spread widening.

As for the southern European peripherals, both Greece and Italy rank within the bottom 10% of high-income, advanced economies. The Iberian Peninsula had a similar performance. These countries are still struggling in the aftermath of the financial crisis. Greece and Italy have suffered from declines in their political risk and political stability scores since the last update in spring this year.

Italy is one of the three EMU countries which score below 6 - the others are Slovak Republic and Greece. In funds such as Robeco Euro Government Bonds and Robeco Global Total Return Bond Fund we have been reducing holdings in Italian bonds since March this year.

In Greece, the social cost of the crisis has been severe and the country’s social unrest indicator has deteriorated continuously over recent years. Political prospects look a bit brighter in Spain, which finally has a new government after nearly a year of political limbo. However, political uncertainty will not disappear, as Rajoy will face a multitude of challenges and will need to find the right balance when dealing with the diverse expectations and demands of Spanish voters, the European Union, and the separatists’ Catalonian regional government.

Turkey on a deviating path

Turkey has fallen to rank 55, from a previous #50. The after-effects of the failed coup in July are aggravating an already delicate political situation. President Erdogan has responded to the failed coup by intensifying his long-running purges of the army, education system, judiciary, media, police force and state administration. The AKP (Justice and Development Party) has renewed its push for a presidential system that would involve a transfer from executive powers to the president. President Erdogan has also confirmed that he will ask the parliament to consider reintroducing the death penalty as punishment for the plotters behind the failed coup.

The continued decline in the ESG profile of Turkey is an important worry when considering investing in Turkish government bonds and the Turkish lira. We are particularly worried by the decline in the human rights score and by the potential for political and social unrest mentioned above. In our Emerging Debt strategy we have reduced investments in the Turkish lira since September.

Trump’s election victory adding to global political uncertainty

As we already highlighted in the last update in April 2016, political risks around the globe have continued to increase. The US presidential elections outcome, Britain’s exit from the European Union, the refugee crisis in Europe, political discord and geopolitical tensions in a number of countries all represent potential shocks that have been present for quite some time and have become even more pronounced in recent months.

Persistently sluggish recovery, widespread public discontent with economic policies and ‘the establishment’ in advanced economies are giving rise to anti-trade sentiment, protectionist policies and populist tendencies. From this point of view, the surprising outcome of the US presidential elections is just the latest step in a longstanding global trend of increasing political uncertainty and growing populism.


当資料は情報提供を目的として、Robeco Institutional Asset Management B.V.が作成した英文資料、もしくはその英文資料をロベコ・ジャパン株式会社が翻訳したものです。資料中の個別の金融商品の売買の勧誘や推奨等を目的とするものではありません。記載された情報は十分信頼できるものであると考えておりますが、その正確性、完全性を保証するものではありません。意見や見通しはあくまで作成日における弊社の判断に基づくものであり、今後予告なしに変更されることがあります。運用状況、市場動向、意見等は、過去の一時点あるいは過去の一定期間についてのものであり、過去の実績は将来の運用成果を保証または示唆するものではありません。また、記載された投資方針・戦略等は全ての投資家の皆様に適合するとは限りません。当資料は法律、税務、会計面での助言の提供を意図するものではありません。




商号等: ロベコ・ジャパン株式会社  金融商品取引業者 関東財務局長(金商)第2780号

加入協会: 一般社団法人 日本投資顧問業協会