As part of their strategic response to climate change, investors are making commitments to reach net zero and to significantly reduce the greenhouse gas emissions associated with their investment portfolios, which includes sovereign debt. Currently, there is no universally coherent way to assess sovereign debt from a climate change perspective.
ASCOR (Assessing Sovereign Climate-related Opportunities and Risks) was designed to address this gap. As the first tool of its kind, ASCOR can help investors assess sovereign exposure to climate risk and engender greater transparency between issuers, financial institutions, and relevant stakeholders.
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ASCOR will open communication channels and facilitate greater dialogue between private investors and sovereign bond issuers, enabling issuers to demonstrate their climate change progress more easily over time, attract additional investment, and build trust.
Through clarity, transparency, and dialogue, the ASCOR project has the potential to build investor confidence in governments’ climate change goals, which will encourage the redirecting of finance to build more resilient societies.
We have published the ASCOR Consultation Report, explaining the overall framework, and launch a public survey seeking to obtain feedback. In parallel, we will convene virtual and in-person regional roundtables to generate greater insights.
We will conduct assessments of an initial 25 countries and share respective results with sovereign issuer representatives for feedback.
Article by Responsible Investor, covering ASCOR's recent Progress Note.
We will publish the ASCOR Final Report and the pilot country assessments. In the following years, we will assess remaining sovereign debt issuing countries, launch, and integrate this data into the ASCOR tool, which will be regularly updated over time.
The Assessing Sovereign Climate-related Opportunities and Risks (ASCOR) Project is led by asset owners, asset managers and investor networks. ASCOR is co-chaired by Victoria Barron, BT Pension Scheme Management, and Adam Matthews, Church of England Pensions Board. ASCOR was established with the UN-convened Net-Zero Asset Owner Alliance (AOA), Ceres, the Institutional Investors Group on Climate Change (IIGCC), the Principles for Responsible Investment (PRI), and Sura Asset Management, who are all part of ASCOR’s Steering Committee. The project is supported by Chronos Sustainability.
ASCOR’s academic partner is the Transition Pathway Initiative Centre, based at the Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science.
The ASCOR Advisory Committee, who are among the funders of the current stage of the project, is composed of the Steering Committee members and representatives from Aktia Bank, Allspring Global Investments, Amundi Asset Management, Colchester Global Investors, Franklin Templeton, MFS Investment Management, and Ninety One. Additional partners to the project include the investor networks Investor Group on Climate Change (IGCC) and Asia Investor Group on Climate Change (AIGCC).
Country assessments will be updated annually. The assessment date for each country is noted on the ASCOR tool.
The current coverage of the ASCOR tool in 2023 is 25 countries. The plan is to expand to 70 countries in 2024-2025 and subsequently to over 100 countries.
Unless otherwise specified in the indicator methodology, assessments for ASCOR are undertaken using in-depth policy research drawing on public government documents. In the case of most quantitative metrics and some indicators, third-party data sources are used. Most relevant datasets are published under a Creative Commons licence; others require dedicated licensing agreements. All third-party data providers and their respective Terms & Conditions are listed in the References section of the ASCOR methodology note.
The majority of the ASCOR framework is composed of qualitative ‘Yes’ or ‘No’ questions with the aim of providing investors and other stakeholders with clearly interpretable performance indicators. The assessment of these binary indicators requires in-depth and complex policy analysis. To supplement the binary indicators, quantitative metrics are also included in the ASCOR tool, using third-party data providers or quantitative analysis. These quantitative metrics serve as contextual information on the progress countries are making towards meeting their targets and implementing their policies.
The ASCOR tool does not aggregate assessment results into a single composite country ‘score’. As such, there is no weighting of the different indicators and metrics. The ASCOR tool shows each indicator result transparently as a dashboard, allowing users to compare countries on each indicator. The only aggregation analysis in the ASCOR tool is at the thematic area level. The result for an area is ‘Yes’ if all indicators within an area are assessed as ‘Yes’; ‘Partial’ if some of the indicators are assessed as ‘Yes’; and ‘No’ if all of the indicators are assessed as ‘No’.
The ASCOR tool assesses the full range of climate risks and opportunities including both transition risk and physical risk. On the latter, it specifically evaluates how countries are managing physical risk by assessing the presence, comprehensiveness and implementation of adaptation policies. The ASCOR tool does not include physical risk metrics that directly measure exposure to climate hazards.
The ASCOR project has been led by asset owners, asset managers, and investor networks since its inception in 2021 (see the ASCOR Partners listed here). These stakeholders are members of the ASCOR Steering and Advisory Committees and participated in the development of the ASCOR framework and tool.
In early 2023, a consultation process was held to gather feedback on an initial ASCOR framework. The TPI Centre collected feedback through an online survey from a broad range of stakeholders, including governments, investors, investor networks, banks, academia, civil society, non-governmental organisations (NGOs) and the wider public. In addition, the ASCOR project partners convened virtual global webinars and regional roundtables with investor and country representatives in North America, Latin America, Europe, Africa, Asia, Australia and New Zealand. ASCOR also held consultation meetings with key organisations including the Inter-American Development Bank (IDB), International Finance Corporation (IFC), International Monetary Fund (IMF), Network for Greening the Financial System (NGFS) and World Bank as well as with selected national Debt Management Offices and Ministries of Environment to understand country-specific perspectives. The modifications made to the final ASCOR framework based on consultation feedback are described in Appendix 3 of the ASCOR methodology note.
The ASCOR tool is a free, publicly available independent assessment framework that evaluates countries on their progress managing the low-carbon transition and the impacts of climate change. It is not an accounting framework, such as the one developed by the Partnership for Carbon Accounting Financials (PCAF), which help investors to measure and account for their financed and facilitated emissions but complements it. The ASCOR tool fills a market gap by assessing the points of highest importance to investors with respect to sovereign climate performance, therefore enhancing the resources available to investors to enhance their investment analysis.
We expect that investors and other stakeholders will be able to use ASCOR in a variety of ways.
The ASCOR framework was designed to avoid introducing an income bias which could penalise emerging markets when assessing country performance on climate change. It was developed in line with the principle of ‘common but differentiated responsibilities and respective capabilities’ (CBDR-RC) enshrined in the UN Framework Convention on Climate Change (UNFCCC), which posits that countries’ contributions to climate change mitigation should consider their differing responsibilities for climate change and abilities to act. This has important implications for how countries at different income levels are assessed.
The ASCOR tool puts CBDR-RC into practice in several ways. First, in Pillar 1, countries’ 2030 targets are not only assessed against a cost-efficient country 1.5⁰C benchmark, but also against a fair share allocation which considers historical emissions, population and income per capita. In addition, to address concerns that some policy indicators may not be relevant or appropriate for middle- and low-income countries, selected countries are exempt from some of the more ambitious indicators. See the ASCOR methodology note for further details. Overall, by providing consistent comparisons between countries climate policies, the ASCOR tool allows investors to make objective country peer evaluations, helping them identify climate finance opportunities and needs.