In this episode of Moody’s Talks Sovereign Credit, Mauro Leos, Associate Managing Director in the Sovereign Risk Group, and Gabriel Torres, Vice President – Senior Credit Officer in the Sovereign Risk Group, discuss why environmental, social, and governance (ESG) considerations are important and how they impact Moody’s sovereign credit assessments.
They explain that although ESG is often spoken of as a single category it actually includes quite distinct types of risks. And ESG risks are captured in a variety of ways in our credit assessments, some more directly than others. Environmental considerations, such as climate change that impacts small island economies, shows up indirectly in our assessments of nation’s economic strength. That also applies to social risks, including demographic changes that can lead to higher health care spending. In contrast, governance is more directly captured in our assessments of institutional capacity and effectiveness.
