An update on Sovereign Fixed Income ESG scores – Franklin Templeton

ESG factors in portfolio construction can potentially lead to superior investment outcomes. Templeton Global Macro demonstrate this through simulations and highlight five country case studies.

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... Special topics in this April 2022 update include a closer look at the Russia-Ukraine conflict, with an analysis of the lead-up on Russia’s side and the potential consequences to Ukraine and Europe as measured through an ESG lens.

Franklin Templeton Investments also revisit the topic of how Templeton Global Macro’s style of ESG investing fits within the context of modern portfolio theory (also discussed in the April 2021 update).

There has been increasing attention in recent years on the relevance of ESG factors in portfolio construction and on how they may affect quantitative metrics of risk and return. In this update they walk through simulations that show how positive ESG can potentially lead to superior investment outcomes.

Finally, the paper concludes with a series of case studies covering ESG factors in Mexico, Ecuador, India, the United Kingdom and Zambia.

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