19 November 2012: The UN Environment Programme Finance Initiative (UNEP FI) has released a report titled “A New Angle on Sovereign Credit Risk: E-RISC: Environmental Risk Integration in Sovereign Credit Analysis,” which investigates to what extent natural resource risks can impact a country’s economy, and consequently its ability to repay its sovereign debts. The report includes five country analyses: Brazil, France, India, Japan and Turkey.

According to the report, which is based on data from the Global Footprint Network, environmental risks remain largely absent from traditional models to determine sovereign credit ratings and other indicators of economic resilience. The report suggests that bond ratings should take into account how countries manage their natural assets, in order to increase transparency to investors and incentivize governments to manage resources sustainably.

The 38-page report indicates that India now demands 1.8 times more from its ecological assets than it generates, while France demands 1.4 more resources than it produces. Brazil, however, still generates more natural resources and services than its population demands.

The E-RISC report provides a framework to assess the likely risks connected to the planet’s depleting resources, and to allow for more comprehensive insight into the stability of future national income. [UN Press Release] [UNEP Press Release] [Publication: A New Angle on Sovereign Credit Risk]