Moody’s ESG Solutions Group announced today that Goldman Sachs Asset Management (GSAM) will use the company’s recently launched Sovereign Climate Risk Scores, powered by Moody’s affiliate Four Twenty Seven, for use in its ESG evaluation of sovereign risk.

Moody’s launched the Sovereign Climate Risk Scores in December 2020, aiming to provide a dataset offering a detailed view of the future exposure of the global population, the economy, and agriculture to a range of physical climate hazards. According to Moody’s, the scores are the only known dataset matching physical climate risk exposure to population location, GDP (Purchasing Power Parity) and agricultural areas within countries, with detailed metrics including both percent exposed and total amount exposed to each climate hazard.

Moody’s has recently released several solutions measuring and analyzing sustainability and ESG related risks to sovereigns, including the launch of two new ESG scores in January, measuring sovereigns’ credit exposure to ESG factors, and the effect of ESG on default risk.

Emilie Mazzacurati, Global Head of Moody’s Climate Solutions in Moody’s ESG Solutions Group, said:

“Understanding exposure to physical climate hazards is critical for investors and credit institutions in order to price climate risk, and also to help direct finance flows towards adaptation and resilience where they’re most needed. We’re extremely pleased that Goldman Sachs has chosen to use our new dataset to enhance its ESG evaluation of sovereign risk.”

According to Moody’s, GSAM has selected the dataset as an input to its own proprietary Sovereign ESG framework, combining the tool’s assessment of climate risk exposure with qualitative analysis by Goldman Sachs’ investment teams on countries’ capacities to adapt to physical risks.

Prakriti Sofat, Executive Director at Goldman Sachs Asset Management, said:

“Sovereign bonds are an integral part of our fixed income portfolios, but intrinsic uncertainties make it challenging to quantify the long-term impact of climate change on countries. Using this dataset will help us assess this evolving risk and reflect it in our investment decisions.”