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ESG roundup: World's most sustainable country, Financial Reporting Council

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  • ESG roundup: World's most sustainable country, Financial Reporting Council

GLOBAL – Sweden is the most sustainable country in the world, according to a new study by investment manager RobecoSAM.

The study, which evaluates 59 countries – 21 from developed markets and 38 from emerging markets – on a broad range of environmental, social and governance (ESG) factors relevant for investors, ranked Sweden top with a score of 8.25 out of 10.

Rounding out the top three were Australia and Switzerland with scores of 7.87 and 7.83, respectively.

Sweden earned high scores across almost all criteria and, contrary to many developed countries, also scored well on environmental factors such as the use of renewable energy sources and CO2 emissions.

Jürgen Siemer, senior analyst at RobecoSAM, said: "We look at factors such as how a country's government deals with an ageing population, the type of policies and structures in place to foster competitiveness or its dependence on foreign sources of energy. All of these are essential for a country's long-term financial health."

Nigeria came bottom of the ranking with 2.51.

Venezuela and Egypt fared only slightly better, with 3.35 and 3.34, respectively.

The framework of the study – entitled 'Measuring country intangibles: RobecoSAM's country sustainability ranking' – primarily focuses on mid- to long-term factors that have an indirect impact on a government's ability to repay its debt or raise revenue, but that are not considered by traditional sovereign ratings.

Results indicate that a stronger sustainability profile corresponds with a lower insurance premium, suggesting there is added value in gathering information on risks related to a country's sustainability profile in times of risk aversion.

Investors' demand for long-term orientated strategies that integrate ESG considerations across a range of asset classes is likely to grow, according to RobecoSAM, particularly in the wake of the financial crisis, which exposed some of the shortcomings of traditional measures used to evaluate country risk.

This the first country sustainability ranking produced by RobecoSAM and Robeco.

Robeco began to conduct research into country-level sustainability in 2008.

The study can be found here.

In other news, draft guidance on corporate reporting issued by the Financial Reporting Council (FRC), which will underpin the new regulations on narrative reporting that come into force for financial years ending on or after 30 September 2013 for UK listed companies, has been welcomed by the International Integrated Reporting Council (IIRC).

The IIRC says the guidance is a step towards a corporate reporting landscape that achieves concise, relevant and focused information about the strategy, governance, performance and prospects of a business to support investor decision-making.

Paul Druckman, chief executive at the IIRC, said: "I welcome the FRC's encouragement of innovation and experimentation in reporting, which should support a shift in the mindset of a business away from rigid compliance and towards the better communication of its individual value-creation story for its providers of financial capital.

"There is, of course, more to do in terms of articulating a common vision, a clearer roadmap for businesses to follow and, perhaps, more clarity around the definitions of key terms."

While it is the IIRC's vision that IR will evolve to become the long-term global corporate reporting norm for businesses in the future, it believes the draft guidance represents an important stepping stone towards greater alignment between the objectives of high quality, relevant corporate reporting and the means by which this can be achieved, offering the potential for greater clarity for businesses and investors.

The draft guidance can be found here.

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