Emerging debt, Hong Kong is the most interesting market according to Ing's sustainability criteria

Hong Kong is the most interesting market for investors attentive to sustainability criteria environmental, social and governance (ESG). This is indicated by an analysis by ING on 85 emerging countries which also indicates sustainability issues among the factors to be evaluated for the construction of the portfolio, in light of the growing attention of investors towards the debt of these countries. “Social, governance and environmental criteria determine how a country will be able to manage its future and, moreover, have significant implications for solvency and the ability to repay debts – explained Rob Drijkoningen, Head of Emerging Markets Debt at Ing Im – The countries that present, in the long term, a reasonable level of self-sustainability of their model are those with the best credit rating, thus guaranteeing the ability to meet the commitments hired. Conversely, countries with poor governance are more prone to problems, which can easily lead to systemic problems that put creditors at risk. And the top ten is anything but obvious. Behind Hong Kong we find Chile, Singapore, Barbados, the Czech Republic, Estonia, Poland, Korea del Sus, Bermuda and Taiwan. It should be noted that none of the BRIC countries ranks in the Top 20: Brazil comes in 39th position, China in 35th, India in 57th and Russia XNUMXth. In the last positions we find Pakistan, Iraq and Nigeria. Not only. Extending the analysis to the European Union as well, we discover that Italy, Spain and Portugal are behind Uruguay, Lithuania and Latvia.

What does ING evaluate in its ESG methodology? The criteria considered within its Sovereign Risk Model have been expanded to include the characteristics of institutions, the effectiveness of legislation, the ease of doing business, the stability and transparency of the political process, the ability to collect capital, cross-border tensions, the state of health of the banking sector, energy efficiency and the diversification of commercial activity. The rating model determines a state's creditworthiness score using macroeconomic and debt-related criteria. The final result is a weighted average between the quantitative results at a macroeconomic level and those deriving from the application of the sustainability criteria. The latter are obtained through data provided by international institutions, such as the World Bank or the United Nations. Each sustainability factor has a specific relative weight: 35% the solidity of the institutions; 25% political process; 15% financial and economic solidity; 5% structural changes and 20% resistance to exogenous shocks.