Traditionally, emerging market credit analysis has focused mainly on economic and financial variables. These included public debt, inflation, fiscal deficits and current account balances. Additionally, it is widely understood political risk is a key factor that can influence EM sovereign creditworthiness.
Meanwhile, many professional investors have long recognised the importance of ESG (environmental, social and governance) factors. However, owing to conceptual and practical issues such as defining and measuring material ESG factors and limited data availability, few have attempted integration in a systematic way.
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