International asset manager Robeco announced today the release of a new Sovereign SDG Engagement Framework for investors, aiming to guide them in engagements with governments on tackling sustainability challenges.

According to Robeco, the framework was developed in order to address a lack of clear, methods to navigate the complex, emerging area of sovereign engagement, and the impact that sustainability issues can have an impact on the value of sovereign bonds.

esg playbook

The framework, originally published earlier this month in the Journal of Sustainable Finance and Investment, addresses three key considerations for investors to engage with governments. The main steps include prioritizing countries based on their relevance in the investment universe and portfolios and the country’s progress on the SDGs, and determining where investors can make a difference, selecting SDGs facing slow progress in the individual countries, and setting a detailed roadmap for conducting the engagement, encompassing goal setting, finding partnerships in the process, reporting and monitoring progress.

Robeco was involved in one of the first investor sovereign sustainability engagements last year, initiated with the publication of an open letter by a group of investors to Brazilian authorities demanding an end to deforestation. The letter made clear that as financial institutions who must operate in the fiduciary interests of their clients, the environmental trends evolving in Brazil were creating uncertainty regarding investment conditions in the country. Following the publication of the letter, Brazil’s Vice President, Minister of Foreign Affairs, Minister of Agriculture, Minister of Environment, and the President of the Central Bank met with the investors, who continue to monitor the country’s progress on deforestation.

Robeco Senior Portfolio Manager Rikkert Scholten, one of the contributors to the paper, said:

“There is an important role for us to play as sovereign bond investors in supporting the advance of SDGs. The new engagement framework is an essential step in shaping that task.”