October 2016

Country Sustainability Ranking Update – November 2016
Scandinavian trio tops overall
sustainability ranking
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Scandinavian trio slightly ahead of Switzerland
Turkey on a deviating path
Singapore tops the ranking in emerging markets
Trump triumph arousing fears
This report provides a succinct summary and analysis of various countries’ Environmental, Social, and Governance (ESG)
profiles around the globe. It builds on the results of RobecoSAM’s country sustainability assessment which evaluates 62
countries – 22 developed and 40 emerging market economies – via a structured and comprehensive framework covering a
broad range of Environmental, Social and Governance factors that we consider to be particularly relevant for investors from a
risk-return perspective. The resulting scores offer insights into the investment risks and opportunities associated with each
country and provide investors with a better frame of reference for making comparisons among countries and regions. The
summary found here complements findings gained from the more traditional country risk assessment and is particularly
focused on integrating long-term perspectives. For a more detailed outline of the methodology used, please refer to our
brochure “Measuring Country Intangibles” 1.
A notable change within this update is the inclusion of newly accessible data sources and enhanced data disclosures for a
portion of the 17 main indicators. These inclusions are important as the country sustainability ranking (CSR) tool is designed to
be structurally robust enough to make meaningful assessments regarding key sustainability factors driving a country’s
development, but dynamic and adaptive enough to incorporate new data and trends from an ever-changing and increasingly
volatile geopolitical landscape. Moreover, ongoing maintenance of the model ensures it retains its high standards for rigor
and relevance while at the same time complying with best practice. Country ESG scores in the current rankings report have
been impacted in two ways: 1) by changes in their sustainability performance and 2) through enhanced data disclosures.
Major changes in country sustainability scores compared to April 2016 are shown in Figure 2. Please refer to the Appendix for
more details on the new datasets.
Today’s global risk landscape is heavily shaped by ESG factors and their interlinkages with macroeconomic and fiscal
developments. Moreover, many countries’ sustainability performance remains under continued strain due to a backlash of
persisting economic weakness, sustained fiscal pressures, and heightened political risks. The latter have also been highlighted
as the biggest threat to the global economy in the IMF’s latest World Economic Outlook. As already presumed in the April
2016 update, such an environment has, of course, not remained without ramifications for country risks in a broader sense as
confirmed by sovereign credit rating actions in recent months. Between the end of March 2016 and mid-October 2016,
sovereign risk rating downgrades by the three major credit rating agencies greatly exceeded upgrades by a ratio of more than
three to one (45 to 14), indicating the ongoing pressure on sovereign creditworthiness.
1 “Measuring Country Intangibles”, June 2015, available on the RobecoSAM website: http://www.robecosam.com/en/sustainability-insights/aboutsustainability/country-sustainability-ranking.jsp
Figure 1: Country sustainability ranking – October 2016
Dimension & Total Sustainability Scores
Source: RobecoSAM
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 2
Norway—the new standard in sustainability
The new ranking puts Norway at the top, with Sweden and Finland completing the podium and Switzerland running a close
4th. Differences in scores within this lead group were small, with all frontrunners exhibiting very solid and balanced overall
sustainability profiles. Norway was the best performer among social factors within the group of high-income, advanced
economies and ranks in the top 10% of this peer group in 5 out of the 17 main indicators that form the building blocks of the
model. Norway enjoys a very high living standard, thanks to its rich natural resources, which creates the right conditions for
robust governance, sound policy-making, as well as distinct societal values that favor inclusiveness and egalitarianism. These
features are, by and large, also shared by the other Scandinavian counterparts. Second-place went to Sweden with 6 (of 17)
indicators. Norway’s performance is mirrored by its neighbor Finland’s strong showing within the environmental and social
areas, with a top 10% score for 8 (of 17) indicators. Please see Figure 1 for the complete list of country rankings as well as
Figure 3 for the top 10 performers.
Figure 2: Major changes in country ESG scores – Oct 2016 vs Apr 2016
Source: RobecoSAM
Switzerland was only able to garner a top 10% finish in 3 of the 17 indicators, among them political risk and competitiveness.
In the global competitiveness index of the World Economic Forum2, it tops the ranking for the eight consecutive year, ahead
of Singapore and the United States. Other traditional strengths in the country’s ESG profile include education, health,
infrastructure and environmental quality. On September 25, Switzerland was the first country to vote on whether to
implement a green economy. The referendum failed, but is still strong proof of its environmental stewardship. In the area of
energy, it is ranked second just behind Denmark in the World Energy Council’s recently published 2016 Energy Trilemma
Index, reflecting its forward-looking energy policies, which includes the decision to refrain from building new nuclear power
plants.
In addition, on November 27, the Swiss will vote on a Green Party initiative aimed at limiting the use of existing nuclear power
stations to 45 years. Among its weaker ESG scores is welfare spending which is rising continuously as a result of an aging
population and a well-developed but costly health-care system. Health care spending per capita is now already amongst the
highest within the OECD. The growing public awareness of the need to safeguard the long-term viability of the social security
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 3
system is indicative in a recent public vote to increase state pensions. The proposal was rejected by the public— in line with
the position held by the federal council and parliament.
Figure 3: Top 10 country ESG scores
Source: RobecoSAM
Moving down the list, The Netherlands, new to the top 10, has benefited greatly from the inclusion of pension funds in the
aging indicator, as it enjoys the highest pension funds-to-GDP ratio (~160%) worldwide according to OECD figures3. Moreover,
the improved score for the environmental dimension has contributed to the country’s advance in the rankings.
Not surprisingly, the United Kingdom had a major shift in rank and was relegated from the 4th place to 12th. Apart from a
marked depreciation of the British pound, the economic impact of the vote to exit the European Union has remained fairly
modest so far. However, it would be premature to call this a “non-event” as Brexit is not a singular event but a continuously
unfolding series of events and decisions--the real effects of which will only be seen once the nature of the new relationships
with the EU are known. The UK will most likely be forced to adapt its growth model, but can at least count on a robust and
balanced sustainability profile which should facilitate this task. Its governance performance surpasses many of its European
counterparts and the country traditionally ranks in the top echelons in terms of Government Effectiveness, Regulatory Quality,
Rule of Law and Control of Corruption in the World Governance Indicator tables.
On the other hand, income inequality is relatively high and may have contributed to widespread frustration and the success of
the Brexit campaign. The Brexit vote has left a highly divided country and could well lead to political and social tensions going
forward. Even though the political risk score has already declined to 83.5 in October from 85.5 a year ago, these recent
developments have yet to be captured in the data and may result in additional declines. Please see Figure 5 for a more
complete comparison between countries.
Finland takes the lead in the euro area
Finland’s advance in the ESG rankings has allowed it to move to the top within the European Monetary Union (EMU) member
states. The country stands out for its high living standard, excellent education system, low income inequality, valuable health
conditions and the environmental quality. The Finnish government is keen to pursue policies that encourage low-emission
energy sources and that support clean technologies. Finland is the best performer in the environmental and social areas, but
2 WEF, The Global Competitiveness Report 2016-17, p.11; World Economic Forum, Switzerland;
https://www.weforum.org/reports/the-global-competitiveness-report-2016-2017-1/
3
OECD, Pension Markets in Focus, 2015, p.9
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 4
also enjoys top ranking with regard to the Environmental Performance and the Social Progress Indexes, both of which are
now incorporated in our CSR tool. However, persistent economic weakness and an aging population could threaten this
favorable economic and social model, requiring the country to implement further structural reforms to strengthen
competitiveness and increase productivity. Please see Figure 4 for ESG rankings among EMU countries.
Figure 4: ESG scores for EMU countries
Source: RobecoSAM
Ireland’s ESG performance is still above average, even though it had to cede its top position within the EMU peer ranking, with
a drop to position 4. The country benefits from a robust governance framework and enjoys a favorable political and social
climate, which is reflected in leading positions within the Political Risk, Fragile States, and Social Progress Indexes, all
components of our ranking tool. Ireland also enjoys a well-developed welfare system that has not only helped to maintain
social cohesion, but also its readiness to accept painful and needed structural reforms. This, in turn, has contributed to
Ireland’s remarkable recovery from the financial crisis and its status as the euro area’s growth leader during recent years.
As for the southern European peripherals, both Greece and Italy rank within the bottom 10% of high-income, advanced
economies across all 17 main indicators. The Iberian Peninsula had a similar performance across 14 of the 17 indicators. These
countries are still struggling from the aftermath of the financial crisis and progress in various ESG features has slackened in the
more recent past. Greece and Italy have suffered from declines in their political risk and political stability scores since the last
update in Spring this year. Italy will face a crucial constitutional referendum on prime minister Matteo Renzi’s political reforms
on December 4, which could spark further instability and early elections if voters should reject the bill.
In Greece, the social cost of the crisis has been severe and the country’s social unrest indicator has deteriorated continuously
over recent years, pointing to a continued risk of renewed political and social turbulence. Political prospects look a bit brighter
in Spain, which finally has a new government after nearly a year of political limbo. This was made possible after the socialist
party’s recent vote to lift a longstanding veto that blocked the conservative Popular party and acting prime minister Mariano
Rajoy from forming a government. However, political uncertainty will not disappear, as Rajoy will face a multitude of
challenges and will need to find the right balance when dealing with the diverse expectations and demands of Spanish voters,
the European Union, and the separatist’s Catalonian regional government.
Germany – in 13th place overall and 5th in the EMU – displays a well-balanced and solid ESG performance. As with other
mature economies, demographic aging poses an important challenge, as projected employment and population will shrink
over time, pointing to a rising dependency ratio and increasing age-related costs. This could (partly) be offset by improving
employment opportunities for women and the elderly, but a large gender pay gap remains a hindrance. Immigration
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 5
(including refugees) is also increasing the labor pool, but poses considerable integration challenges. It is currently one of the
major political problems facing the nation as it is giving rise to anti-immigration sentiments and further fueling the populist
right-wing AfD party which could result in undesired consequences in the 2017 election.
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High-income
advanced economies*
Norway
Sweden
Finland
Switzerland
New Zealand
Netherlands
Canada
Denmark
Australia
Luxembourg
Ireland
Sc
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Figure 5: Country sustainability profiles in comparison
United Kingdom
Germany
Austria
United States
Japan
Belgium
France
Portugal
Spain
Italy
Greece
High-income
emerging markets*
Singapore
Czech Republic
Taiwan
Slovenia
Hong Kong
Poland
Korea, South
Slovak Republic
Chile
Israel
Hungary
Croatia
UAE
Qatar
Saudi Arabia
Kuwait
Upper middle-income
emerging markets*
Romania
Malaysia
Jamaica
Argentina
Brazil
Kazakhstan
Russia
Dominican Rep.
Mexico
Peru
Colombia
China
Venezuela
Lower middle-income
emerging markets*
South Africa
Philippines
Ukraine
Morocco
Thailand
Turkey
Indonesia
El Salvador
India
Egypt
Nigeria
Performance in the top 10% of peers
Performance above peer average
Performance below peer average
Performance in the bottom 10% of peers
* Country classification according to World Bank. For the 2017 fiscal year, the World Bank defines low-income economies as
those with a GNI per capita of USD 1,025 or less in 2015; lower middle-income economies as those with a GNI per capita between
USD 1,026 and USD 4,035; upper middle-income economies as those with a GNI per capita between USD 4,036 and USD 12,475, and highincome economies as those with a GNI per capita of USD 12,476 or above.
Source: RobecoSAM
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 6
Singapore dominates the ESG ranking among emerging markets
Singapore demonstrates clear leadership in sustainability in the emerging markets (EM) universe as well as in the sub-group
of high-income emerging economies. With a score of 6.85 it has outpaced several advanced economies in terms of
sustainability performance and is ranked 17th overall. The country displays a top 10% score for the governance area as well as
for 12 out of the 17 main indicators, but shows a below-average score compared to its peer group with respect to energy,
social indicators, liberty & inequality, accountability and aging. By a considerable margin (more than 0.5 points) the Czech
Republic and Taiwan follow with ranks of #20 and #21 (overall). Taiwan is one of the main beneficiaries of the incorporation
of new data (see Appendix for a brief explanation), but still scores below average for its environmental performance; the
same applies to its East Asian neighbors South Korea and Hong Kong.
Korea scored rather poorly relative to peers in the Environmental Performance Index and thus “greening” growth will be
required to reverse the environmental degradation that came with rapid industrialization and to improve the quality of life.
The country also faces water shortages; the amount of water taken from ground or surface water sources as a share of
renewable resources is among the highest in the OECD. Air pollution too remains high and should be reduced. The launch of a
nationwide emissions trading system in 2015 is a key step in fulfilling Korea’s commitment to COP 21 which aims to reduce
greenhouse gas (GHG) emissions 37% by 2030 relative to a “business as usual” scenario. Please see Figure 6 for the top 10
performers among EM countries.
Figure 6: Top 10 emerging markets country ESG scores
Source: RobecoSAM
Slovenia, ranked 4th place within the EM universe, scoring best in the environmental and social dimensions, but scoring worse
relative to most of its high-income EM peers in the indicators aging, competitiveness, institutions and political risk. What is
striking is that none of the oil-rich Gulf Cooperation Council (GCC) countries that belong to the high-income emerging markets
group have made it into the top 10 of the sustainability rankings within the EM universe.
A look at Figure 5 reveals that, in fact, Kuwait, Qatar, Saudi Arabia and the UAE - all occupying a place in the bottom part of
the ranking - are the worst sustainability performers in their peer group. Kuwait scored worst for its environmental and
governance performance and displayed a below-average score for 15 of the 17 main indicators. Saudi Arabia earned the worst
score for its social performance and scored below-average in 14 main indicators. This underscores the need for reform in GCC
countries, even more so as they have been severely hit by the slump in oil prices. GCC nations need to intensify efforts and
focus their public spending on investments related to (“soft” & physical) infrastructure, education and health care in order to
create the basis for a more sustainable and inclusive growth model. Saudi Arabia’s “Vision 2030” is certainly a good example
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 7
of such an intention that is headed in the right direction, but lasting progress will depend upon the real implementation of
such plans.
As mentioned in the introduction, new data sources were used in the calculation of this year’s ranking and much of it was
pertinent to the lowest performing countries (See Figure 2). However, with the exception of Russia, the additional data did
nothing to change the overall composition of the bottom 10. Despite Russia’s upward jump by 10 positions to #46 overall, it
still displays a fairly average overall ESG profile when compared with its income peer group (this year Russia was re-classified
from a high-income country to an upper-middle income country by the World Bank). The country enjoys a top score in the
environmental area and an above-average score in the social dimension, but suffers from weak performance in the
governance area, as is visible from Figure 5. Russia was replaced by Turkey among low ESG performers. The rankings of the
lowest 10 ESG performers, most of whom, with the exception of China and Venezuela, belong to the lower-middle income
emerging market economies, have remained relatively stable. Please see Figure 7 for a complete list of the bottom 10
performers.
Figure 7: Bottom 10 country ESG scores
Source: RobecoSAM
As for China and Venezuela, a comparison with their peers in the upper-middle income segment reveals that their
sustainability performance is clearly inferior. China displays the worst performance in the environmental area and a subaverage score in the social and governance dimensions; Venezuela (which had its income classification changed in 2016 from
the high-income to the upper-middle income category) exhibited the worst score in governance and a below-average
performance in the social area. Latin America’s black sheep appears to be caught in a never-ending downward spiral and is
bracing for a new round of turbulence after the National Election Assembly suspended the preparations of a referendum on
removing President Nicolas Maduro in late October—a move opposition leaders are calling a coup. New talks between the
opposition and the government should now end the political crisis while President Maduro seeks to fend off a campaign
seeking his removal. However, the talks are mired in distrust and the outcome is very uncertain.
Turkey on a deviating path
Turkey’s overall ESG score has fallen by 0.25 points to 3.81, relegating it to rank #55, from a previous #50. The country’s
sustainability profile is clearly being shaped by the disruptive politics of recent years that have also led to a steady decline in its
governance performance as measured by the six World Governance Indicators (see Figure 8). Political risk and social unrest
indicators have deteriorated as well; divisions between different groups in the country are deep and the potential for political
and social unrest is rising further. The after-effects of the failed coup in July are aggravating an already delicate political
situation. President Erdogan has responded to the failed coup by intensifying his long-running purges of the army, education
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 8
system, judiciary, media, police force and state administration. The crackdown will further weaken the country’s institutions
and is already visible in the country’s declined score for the institutions indicator. The AKP (Justice and Development Party)
has renewed its push for a presidential system that would involve a transfer from executive powers to the president. President
Erdogan has also has also confirmed that he will ask the parliament to consider reintroducing the death penalty as
punishment for the plotters behind the failed coup. Considering recent political developments – not yet reflected in most data
– there is no indication of a turn for the better and increasingly the unfavorable political situation risks disrupting the
economy in a more severe way.
Figure 8: Turkey: Gradual erosion of public governance, 2011-15
Source: RobecoSAM, World Bank – World Governance Indicators
India’s ESG profile—Progress slow but visible and steady
India’s demotion to position #59 is largely the result of gains in scores by other countries in this group and does not reflect an
absolute deterioration of the country’s ESG performance. Two years after PM Narendra Modi took over, he is on track in terms
of his ambitious reform program; progress is being made, albeit in slow and gradual steps. This is visible from the
improvement in World Governance Indicators and in India’s ranking with regard to other selected sustainability criteria (see
Figure 9). More recently, the Modi government eventually managed to pass the crucial unified VAT bill, which is another
promising sign and a keystone of his reform agenda. A particularly weak spot in India’s ESG profile is the environment. Large
population growth, poor resource management, and widespread poverty contributed to severe environmental issues such as
air & water pollution, growing water scarcity, loss of biodiversity, forest preservation and land degradation. These factors
were also reflected in its poor showing in Yale University’s Environmental Protection Index (EPI), where it ranked #141 out of
180 countries.
Closely related to these results are the poor health conditions of the vast majority of the population, which lacks access to
clean water, sanitation, and sufficient nutrition. A 2014 World Bank report estimates that the ecosystem degradation in India
costs the country $80 billion annually, i.e. 5.7% of GDP4, indicating the need to embrace clean technology and sustainable
policies. Moreover, the new government has announced its intention to promote clean technology and a significant
investment in clean energy is visible. Another area where the country performs poorly is the significant gender gap. In the
Gender Inequality Index ranking, India occupies the penultimate place within our ranking universe, only ahead of Nigeria.
4
World Bank, India – Green Growth Overcoming Environment Challenges & Promote Development, March 6, 2014
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 9
Increasing female economic participation has high growth potential as stated in a 2015 McKinsey study. According to this
analysis, India has the most to gain from improving the gender balance and could add 16% (or $0.7 trillion) to incremental
GDP by 2025 in a “best-of-region scenario” as compared to the “business as usual scenario”5. This is yet another indication of
India’s remaining shortcomings but also huge proof of its enormous potential in the area of sustainability. Please see Figure 9
for more specific factors influencing India’s ESG ranking.
Figure 9: Changes in India’s ESG rankings across select ESG indexes, 2014-16
World Governance Data (WGI) data is for 2015; Gender Inequality Index for 2014
Source: RobecoSAM, World Bank, Fund for Peace, PRS Group, UN, Social Progress Imperative, Yale, World Energy Council
Trump’s election victory adding to global political uncertainty
As has already been highlighted in the last update in May 2016, political risks around the globe have continued to increase
and have not only emerged as the biggest threat to world economic growth, but also to overall ESG performance. U.S.
presidential election outcome, Britain’s exit from the European Union, the refugee crisis in Europe, political discord and
geopolitical tensions in a number of countries all represent potential shocks that have been present for quite some time
and/or have become even more pronounced in recent months. Persistently sluggish recovery, widespread public discontent
with economic policies and “the establishment” in advanced economies are giving rise to anti-trade sentiment, protectionist
policies and populist tendencies, with potentially broader economic and political ramifications, as displayed in Figure 10.
Widening domestic strife is already visible in various countries, not only hampering reform efforts and policy effectiveness, but
are also feeding concerns about possible policy shifts.
From this point of view, the surprising outcome of the U.S. presidential election is just the latest step in a longstanding global
trend of increasing political uncertainty and growing populism. Trump’s election victory displayed a deep and widespread antiestablishment sentiment among American voters and comes as a backlash to those increasingly beset by rising income
inequality, economic globalization, financial liberalization, technological innovation and societal shifts, including migration.
These trends are in no way limited to the U.S. but are also visible in several European countries and has been identified as one
of the major driving forces behind Brexit. They are also likely to influence upcoming elections in the Netherlands, France and
Germany where right-wing parties are gaining traction.
5
McKinsey Global Institute, The Power of Parity: How Advancing Women’s Equality can add $12 trillion to global growth, September 2015, p.5
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 10
Even though it is too early at this stage to gauge the full extent of the consequences, the dirty election campaign and Trump’s
victory has left a deeply divided country with a significantly changed economic and political landscape. However, Trump’s
policy platform – while still lacking details – contains quite some controversial plans and pledges that could have costly
economic impacts, fuel political volatility and adversely affect America’s sustainability profile with global repercussions. His
economic plans are sometimes contradictory, for example, when promising a wave of tax cuts while, at the same time,
providing for large spending increases on infrastructure and defense. Mr. Trump’s skepticism of international free trade could
initiate a new era of protectionism and negatively impact some key trading partners, above all China and Mexico. Adverse
social and environmental effects could result from Trump’s pledges to restrict immigration, deport illegal immigrants, repeal
Obamacare, ease environmental regulations and cancel the Paris climate deal, all of which would sooner or later affect the
U.S.’ ESG scores. True, it remains to be seen to what extent Trump will stick to his radical campaign rhetoric and whether
Congress will agree to all such plans, although the secured Republican majorities in the House of Representatives and the
Senate could leave the new president with somewhat weaker checks and balances. Even more potentially damaging are the
risks in the foreign policy area where Mr. Trump has more power to make unilateral moves. His intention to reduce
international engagement and his lukewarm stance on NATO could adversely affect the international security architecture and
result in growing geo-political tensions with various possible spillover effects as outlined in Figure 10.
Figure 10: Political risks still on an upward trend
Source: RobecoSAM
However, political problems are not limited to advanced economies but extend around the globe. In addition to the
potentially severe consequences resulting from the U.S. election outcome, emerging markets are already faced with a
number of political problems. Examples from Asia include: the recent escalation of the long-standing conflict between India
and Pakistan over Kashmir, North Korea’s fifth underground nuclear test despite threats of heavier US and UN sanctions, and
ongoing tensions related to China’s maritime disputes in the South China Sea. These are all critical reminders of potential
threats to regional security and stability. China, apart from being involved in territorial confrontations with several of its
neighbors, is also in the midst of a delicate economic transition process and is facing a major leadership re-shuffle beginning
next year, involving the replacement of five of the seven current members of the Politburo’s Standing Committee. What
implications these changes will have for the pace of reforms remains uncertain. In Thailand, the recent death of King
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 11
Bhumibol is likely to further weaken the country’s institutions and augurs further complications in an already turbulent
political situation.
In Latin America, apart from Venezuela, politics remain in flux—most notably in Brazil and Colombia. Somewhat surprising,
on October 2, Colombian voters rejected a peace deal with the FARC rebels, which could hurt the country’s development even
though both sides have stated intentions to restart negotiations. In Brazil, the impeachment of President Rousseff and the
installation of a new administration under interim President Michel Temer has allowed the country to refocus on economic
and fiscal policies, which could help to engineer a much needed economic stabilization. But, given widespread dissatisfaction
with the impeachment process and Temer’s low approval rates, unpopular policies will not be easy to implement.
Last but not least, in the Middle East and North African region, the political environment remains characterized by ongoing
(geopolitical) conflicts, civil war, widespread social unrest, recurrent terrorist attacks, and a precarious security situation with
severe repercussions far beyond the region’s borders. Stark examples of these spillover effects are the fueling of the refugee
crisis and terrorist activities as outlined in Figure 10.
Most of these countries enjoy favorable demographics with stronger population growth and a much younger population,
which benefits their scores for aging. On the other hand, they are faced with the huge challenge of creating enough
employment opportunities in order to promote prosperity and prevent the spread of frustration and lack of perspective
among youth that contributed to the breakout of the Arab Spring. As one would expect, these factors are also reflected in the
low scores among indicators such as social unrest, political risk and stability for the countries in this region. Considering
current prospects for continued, widespread and heightened political and social instability, hopes for an improvement in ESG
profiles in the region remain feeble.
“A proper country sustainability assessment provides additional information and
valuable insights into a country’s underlying risk drivers that we believe are critical to
making balanced investment decisions”.
Max Schieler
Senior Country Risk Specialist
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 12
Appendix
Ongoing reviews of the underlying data and maintenance of the methodology used to construct any model is an integral part
of ensuring its completeness and ongoing predictive power. This no different with the RobecoSAM country sustainability
ranking. In this case, the incorporation of newly accessible data sources and enhanced data disclosure for a portion of the 17
main ESG indicators used in our approach is aimed at capturing several new relevant ESG features and thus providing an even
more comprehensive appraisal of a country’s underlying sustainability profile. The enhanced data disclosure involves the
following main indicators: environmental status, energy, environmental risk, social indicators, liberty & inequality (now
political rights & civil liberties), aging and institutions. A description of new data is provided in the box below.
Energy Trilemma Index (ETI)
The World Energy Council’s Energy Trilemma Index ranks 125 countries with regard to their energy sustainability and is based on three
dimensions: energy security, energy equity and environmental sustainability. The results reflect a country’s ability to balance the tradeoffs between the three trilemma dimensions and include 12 indicators such as Primary Energy & CO2 Intensity, Ratio of Energy
Production to Consumption, Diversity of Electricity Generation, Net Fuel Imports, and Exports respective to GDP.
Environmental Performance Index (EPI)
Yale University’s Environmental Performance Index is used for the assessment of a country’s “Environmental Status”. The EPI
demonstrates a country’s performance across nine environmental issue areas on the basis of more than 20 indicators and, in
particular, with respect to the protection of ecosystems and human health. The issue areas cover aspects such as Air Quality, Water &
Sanitation, Water Resources, Forests, Biodiversity or Climate & Energy.
Social Progress Index (SPI)
The Social Progress Index compiled by the Social Progress Imperative provides a framework to translate economic gains into better
social and environmental performance in order to promote economic development and ensure social progress. The SPI covers three
main pillars – Basic Human Needs, Foundations of Wellbeing, and Opportunity. Within each of these are four components comprising
three to five specific indicators. The twelve components include criteria such as Nutrition & Medical Care, Shelter, Access to Basic
Knowledge, Health & Wellness, Personal Rights, and Tolerance & Inclusion. Together with the Gender Inequality Index, Child Labor
data and the GINI Index, the SPI is merged into the model’s “Social Indicators”.
Freedom in the World
Freedom in the World assesses the real-world rights and freedoms enjoyed by individuals in a country. Along a series of 25 indicators,
Freedom House determines a country’s Political Rights (PR) and Civil Liberties (CL) status, with the latter two used for our “Liberty &
Inequality” indicator. The checklist of questions on which the PR & CL assessment is based includes aspects like Electoral Process,
Electoral Laws, Political Pluralism & Participation, Freedom of Expression, Organizational Rights, and Personal
Autonomy.
Rankings affected by the switch to new data sources
As indicated in the introductory remarks, country ESG rankings in the current rankings report have been impacted in two ways: 1) by
changes in their sustainability performance and 2) through enhanced data disclosures. Taiwan score was the most impacted by
improved data disclosure and thus provides the best illustrative example for an explanation of changes. Given the country’s ongoing
dispute with mainland China over its sovereign status, Taiwan is excluded from membership in various international organizations like
the UN bodies and the World Bank. Thus, it is not covered in these institutions’ country statistics. Moreover, data for Taiwan is quite
often missing in the databases of other data providers, which has contributed to its relatively poor performance across comparative
indicators and its low country ESG score overall. The use of a broader set of sub-indicators for the Environmental Status and Social
Indicators has now resulted in a much improved in these respective areas, and therefore a more accurate assessment of the country’s
real ESG profile when compared to peers. See Figure 11 below.
With regard to the impact by indicator, shifts in total scores result primarily from the governance area, with much of the changes
stemming from Aging. As for the latter, for example, the first-time inclusion of relatively new available data from the IMF about agerelated expenditures and from the OECD on the size of pension assets has allowed to gain a more balanced picture about a nation’s
aging feature. This has led to higher scores for most advanced economies, above all for Finland, Canada and the Netherlands. On the
other hand, the majority of emerging markets – with Nigeria and Russia as notable exceptions – scored lower for the Aging indicator
as the inclusion of this data did partly compensate for their usually more favorable demographics.
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 13
Figure 11: RobecoSAM country sustainability ranking tool
Source: RobecoSAM
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 14
Data sources
Environmental Status
Energy
Environmental Risk
Social Indicators
Human Development
Social Unrest
Liberty & Inequality
Competitiveness
Political Risk
Accountability
Stability
Effectiveness
Regulatory Quality
Rule of Law
Corruption
Aging
Institutions
Yale; Environmental Performance Index
http://epi.yale.edu/
World Energy Council; Energy Trilemma Index
https://trilemma.worldenergy.org/
United Nations; Energy Statistics
http://unstats.un.org/unsd/default.htm
Bündnis Entwicklung Hilft; World Risk Report
http://www.entwicklung-hilft.de/home.html
Germanwatch; Global Climate Risk Index
https://germanwatch.org/en/cri
Social Progress Imperative; Social Progress Index
http://www.socialprogressimperative.org/
UNDP; Gender Inequality Index
http://hdr.undp.org/en/data
UNICEF; Child Labour
https://data.unicef.org/
World Bank; World Development Indicators – GINI Index
http://databank.worldbank.org/data/
UNDP; Human Development Report
http://hdr.undp.org/en
Fund for Peace; Fragile States Index
http://fsi.fundforpeace.org/
Freedom House; Political Rights & Civil Liberties
https://freedomhouse.org/reports
World Economic Forum; The Global Competitiveness Report 2016-2017, WEF, Switzerland, 2016
https://www.weforum.org/reports/the-global-competitiveness-report-2016-2017-1/
PRS Group; Political Risk Services (PRS)
http://www.prsgroup.com/
World Bank; Worldwide Governance Indicators
http://info.worldbank.org/governance/wgi/index.aspx#home
World Bank; Worldwide Governance Indicators
http://info.worldbank.org/governance/wgi/index.aspx#home
World Bank; Worldwide Governance Indicators
http://info.worldbank.org/governance/wgi/index.aspx#home
World Bank; Worldwide Governance Indicators
http://info.worldbank.org/governance/wgi/index.aspx#home
World Bank; Worldwide Governance Indicators
http://info.worldbank.org/governance/wgi/index.aspx#home
World Bank; Worldwide Governance Indicators
http://info.worldbank.org/governance/wgi/index.aspx#home
IMF - Fiscal Monitor; NPV of Pension & Health Care Spending Change 2015-50
http://www.imf.org/external/
UN – Population Division; Old Dependency Ratio & Old Dependency Ratio 2050
https://esa.un.org/unpd/wpp/
World Bank – Women, Business and the Law; Retirement Age
http://wbl.worldbank.org/
World Economic Forum; The Global Competitiveness Report 2016-2017, WEF, Switzerland, 2016
https://www.weforum.org/reports/the-global-competitiveness-report-2016-2017-1/
Country Sustainability Ranking Update – November 2016 • RobecoSAM • 15
About RobecoSAM
Founded in 1995, RobecoSAM is an investment specialist focused exclusively on Sustainability Investing. It offers asset management,
indices, impact analysis and investing, sustainability assessments, and benchmarking services. Asset management capabilities cater to
institutional asset owners and financial intermediaries and cover a range of ESG-integrated investments (in public and private equity),
featuring a strong track record in resource efficiency themed strategies. Together with S&P Dow Jones Indices, RobecoSAM publishes the
globally recognized Dow Jones Sustainability Indices (DJSI). Based on its Corporate Sustainability Assessment (CSA), an annual ESG analysis
of over 3,800 listed companies, RobecoSAM has compiled one of the world’s most comprehensive databases of financially material
sustainability information. The data of the CSA is also included in USD 87.3 billion of assets under management by the subsidiaries of the
Robeco Group.
RobecoSAM is a sister company of Robeco, the Dutch investment management firm founded in 1929. Both entities are subsidiaries of the
Robeco Group, whose shareholder is ORIX Corporation. As a reflection of its own commitment to advocating sustainable investment
practices, RobecoSAM is a signatory of the UNPRI and a member of Eurosif, ASrIA and Ceres. Approximately 130 professionals work for
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