Assessing Sovereigns’ Progress Towards Net Zero for Fixed Income Investors
- 10 December 2024 (5 min read)
Is the US on track to achieve net zero emissions by 2050?
How do developed economies compare to emerging markets in terms of their ambitions for reaching net zero?
Is there significant variation in progress towards net zero among European Union countries?
Which countries are leading the way in these areas on each continent?
Until recently, there was no systematic, widely recognised methodology for answering these questions.
At AXA IM, we have developed a framework that evaluates progress towards net zero for corporates, based on the Net Zero Investment Framework (NZIF) and resulting Institutional Investors Group on Climate Change (IIGCC) implementation guidelines. However, extending this framework to other major liquid asset classes, first and foremost sovereign bonds, has been a long-awaited challenge for investors.
The primary obstacle has been the lack of widely recognised public data sources that could serve as the foundation for asset managers in their approach to sovereigns, ensuring consistency across interpretations while maintaining a common methodological ground. In contrast, the corporate asset class has many such sources, including the Science Based Targets initiative, Transition Pathway initiative and Climate Action 100+.
This year, the Assessing Sovereign Climate-related Opportunities and Risks (ASCOR) project released its first country database. The IIGCC conducted a workshop with market practitioners focused on developing guidelines based principally on this database, together with Climate Action Tracker (CAT) and the Climate Change Performance Index (CCPI). As a committed investor in sovereign assets, AXA IM actively participated in these workshops, leading to the publication of the IIGCC's first guidelines for assessing progress towards net zero for sovereigns in mid-2024.
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