Sustainability rating of sovereign bonds · 2 Swiss Private Bank, founded in 1841 Specialised in asset management and private banking EUR 63.2 billion of assets-under-management,

Bank Sarasin & Co. Ltd

Sustainability ratingof sovereign bonds

Balazs MagyarSarasin Sustainable Investment

Footprint Forum 2010Colle di Val d’Elsa, June 2010

2

Swiss Private Bank, founded in 1841Specialised in asset management and private bankingEUR 63.2 billion of assets-under-management, more than 1,500 employees

Sustainable asset management since 1989Broad range of asset classes (bond, equity, real estate, etc.)EUR 8 billion of assets-under-management, approx. 50 employees

Sustainability assessment of countries / sovereign bonds since 2003

Sarasin Sustainable Investment: Bank Sarasin & Co Ltd. –a highly regarded Swiss private bank

3

Sovereign bonds

Investor Government

one-off payment

today

EconomicActivities

government spending

tax revenue

Debt repayment requires sustainable tax revenues

interest and principal payments

in the future

4

Economic activity

Sustainable tax revenues require sustainable economic activities

(Limited) Resources

Qualityof life

Economic system

Transformation efficiency

Process efficiency

5

Sustainability rating ofsovereign bonds 2010

Assessment of emerging and developed countries for the first time on the basis of the same indicators:

Over 150 countriesAbout 50 indicators in the fields of:

– Environment– Economy– Social

Focus of analysis:– Availability of resources

• mainly natural resources• but also human and financial res.

– Efficiency• in transforming resources into quality of life• of the economic, political and social processes

Res

ourc

e ef

ficie

ncy

Availability of resources

Sarasin Sustainability-Matrix®

6

Availability of resources –horizontal axis

EnvironmentBiocapacity (absolute and relative tothe Ecological Footprint of production)Nuclear powerWater scarcityBiodiversityClimate change risks(extreme weather events, agriculture, sea level rise)

Society & economyDemographyWealth (tangible and intangible capital)Public debtNet foreign assets

not covered directly bythe Ecological Footprint


Res

ourc

e ef

ficie

ncy

low high

low

high

7






Res

ourc

e ef

ficie

ncy

low high

low

high

8

Mediterranean countries haveecological deficits in their production

Reserve

Deficit

Source: Global Footprint Network (as of 2006)Mediterranean countries are marked with solid bars.

Isra

el

Alba

nia

Kuwa

itUn

. Ara

b Em

.

Gree

ceIta

ly

Slov

enia

Turk

ey

Ecua

dor

Swed

enBo

livia

Mor

occo

Spai

n

-10

-5

0

5

10

15

20

Glob

al h

ecta

res

per p

erso

n

9

Water footprint exceeds or approaches renewablewater resources in most Mediterranean countries

Source: Water Footprint Network, Sarasin (as of 2001)Mediterranean countries are marked with solid bars.

Jord

an

Alb

ania

Mal

ta

Con

go, R

ep.

Ecu

ador

Cro

atia

Sw

eden

Slo

veni

a

Gre

ece

Turk

ey

Italy

Kuw

ait

Un.

Ara

b E

m.0

100

200

300

400

500

Wat

er fo

otpr

int i

n %

of R

WR

10,8

952,

329

1,79

31,

478

713

514

10






Res

ourc

e ef

ficie

ncy

low high

low

high

11

0102030405060708090

100110

0% 2% 4% 6% 8% 10%

Share of population

Age

(5-ye

ar g

roup

s)

Greece

Slovenia

Optimum

Italy

Turkey

2050

Many Mediterranean countriesare affected by population ageing

Source: UN, Sarasin

0102030405060708090

100110

0% 2% 4% 6% 8% 10%

Share of population

Age

(5-ye

ar g

roup

s)

Greece

Slovenia

Optimum

Italy

Turkey

2010

0102030405060708090

100110

0% 5% 10% 15% 20%

Share of population

Age

(5-ye

ar g

roup

s)

Ecuador

Sweden

Optimum

United Arab Emirates

Uganda

2010

0102030405060708090

100110

0% 5% 10% 15% 20%

Share of population

Age

(5-ye

ar g

roup

s)

Ecuador

Sweden

Optimum

United Arab Emirates

Uganda

2050

12

High foreign and public debt levels meanconceding future resources to someone else

Source: IMF, OECD, CIA, Sarasin (as of 2008)Mediterranean countries are marked with solid diamonds.

Zimbabwe

Qatar

Japan

Un. Arab Em.Sweden

Ecuador

Jordan

SloveniaTurkey

GreeceItaly

0

50

100

150

200

-150 -100 -50 0 50 100 150

Foreign debt (net, % of GDP)

Publ

ic d

ebt (

gros

s, %

of G

DP)

13

Resource efficiency –vertical axis

Transformation efficiencyQuality of life

– Material well-being (GDP)– Education– Health

Resource consumption– Ecological Footprint of consumption– Nuclear power– Water consumption

Process efficiencyEconomic structure(industrial heterogeneity, inflation, adj. savings, etc.)Governance(political stability, corruption, etc.)Social conditions(income equality, gender empowerment, etc.)

deviation from the norm


Res

ourc

eef

ficie

ncy

low high

low

high

14








Res

ourc

eef

ficie

ncy

low high

low

high

15

Mediterranean countries transform natural resourcesinto quality of life only with medium efficiency

Source: IMF, OECD, CIA, Sarasin (as of 2008)Mediterranean countries are marked with solid diamonds.

Mali

Netherlands

Ecuador

Un. Arab Em.Sweden

Cyprus

Turkey

Slovenia

ItalyGreece

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Resource consumption

Qual

ity o

f life

high middle

low

16








Res

ourc

eef

ficie

ncy

low high

low

high

17

Economic, political and socialprocesses show a high dispersion

Source: IMF, OECD, CIA, Sarasin (as of 2008)Mediterranean countries are marked with solid bars.

Fran

ceSw

eden

Denm

ark

Italy

Slov

enia

Gree

ce

Turk

eyUn

. Ara

b Em

.

Zim

babw

e

Ecua

dor

Syria

Alge

ria

0%

20%

40%

60%

80%

100%

In %

of t

he h

ighe

st ra

ting Social

GovernmentalEconomic

18


for sovereign bonds


Res

ourc

e ef

ficie

ncy

low high

low

high

19


for sovereign bonds

Mediterranean countries are marked with solid diamonds. Source: Sarasin

Zimbabwe

Australia

JapanNetherlands

Ecuador

Sweden

UAE

Greece

Italy

Slovenia

Turkey


Reso

urce

effi

cien

cy

low high

low

high

20


for sovereign bonds

Source: Global Footprint Network, Sarasin

Ecuador

Sweden

UAE

Greece

Italy

Slovenia

Turkey


Reso

urce

effi

cien

cy

local and globalonly localonly globalno reserve

Ecologicalreserve:

low high

low

high

21

Important Information

This publication has been prepared by Bank Sarasin & Co. Ltd, Switzerland, (hereafter “BSC”) for information purposes only. It contains selected information and does not purport to be complete. This document is based on publicly available information and data (“the Information”) believed to be correct, accurate and complete. BSC has not verified and is unable to guarantee the accuracy and completeness of the Information contained herein. Possible errors or incompleteness of the Information do not constitute legal grounds (contractual or tacit) for liability, either with regard to direct, indirect or consequential damages. In particular, neither BSC nor its shareholders and employees shall be liable for the opinions, estimations and strategies contained in this document. The opinions expressed in this document, along with the quoted figures, data and forecasts, are subject to change without notice. A positive historical performance or simulation does not constitute any guarantee for a positive performance in the future. Discrepancies may emerge in respect of our own financial research or other publications of the Sarasin Group relating to the same financial instruments or issuers. It is impossible to rule out the possibility that a business connection may exist between a company which is the subject of research and a company within the Sarasin Group, from which a potential conflict of interest could result. This document does not constitute either a request or offer, solicitation or recommendation to buy or sell investments or other specific financial instruments, products or services. It should not be considered as a substitute for individual advice and risk disclosure by a qualified financial, legal or tax advisor.This document is intended for persons working in countries where the Sarasin Group has a business presence. BSC does not accept any liability whatsoever for losses arising from the use of the Information (or parts thereof) contained in this document. © 2009 Copyright Bank Sarasin & Co. Ltd. All rights reserved.

Bank Sarasin & Co. Ltd

Thank you foryour attention

Balazs [email protected]+41 61 277 7366

mailto:[email protected]

23

Sarasin sustainability assessment –Country profile of Greece

0% 20% 40% 60% 80% 100%

Greece Global average


Reso

urce

effi

cien

cy

low high

low

high


Ecologicalcapital

Climate changegains / losses

Human, tangible,intangible capital

Educationefficiency

Healthefficiency

Economicstructure

Governance

Highlights (as of March 2010):low biocapacity, Ecol. Footpr. of product. considerably higherlow share of protected areas, high share of endangered speciesadverse demographics (over-ageing)high levels of public and foreign debtfair level of quality of life but high resource consumptionlow competitivenesshigh corruption, rather weak peace index

Financial assets /liabilities

Materialefficiency

Socialframework

0% 20% 40% 60% 80% 100%

Greece Global average

24

Sarasin sustainability assessment –Country profile of Italy

0% 20% 40% 60% 80% 100%

Italy Global average


Reso

urce

effi

cien

cy

low high

low

high


Ecologicalcapital

Climate changegains / losses

Human, tangible,intangible capital

Educationefficiency

Healthefficiency

Economicstructure

Governance

Highlights (as of March 2010):very low biocapacity, Ecological Footprint of production higherscarce water, negative climate change effects demographics among the most adverse (over-ageing)high level of public debt but moderate level of foreign debtrel. high quality of life but resource consumption also highelevated suicide rates, uneven income distributionweak governance (corruption and rule of law in particular)

Financial assets /liabilities

Materialefficiency

Socialframework

0% 20% 40% 60% 80% 100%

Italy Global average

Documents

Sustainability rating of sovereign bonds · 2 Swiss Private Bank, founded in 1841 Specialised in asset management and private banking EUR 63.2 billion of assets-under-management,