Sustainability Considerations When Purchasing Corporate Bonds

Last year Sweden’s Riksbank announced it will only purchase bonds issued by companies judged to comply with international sustainability standards. This paper outlines the criteria on which those selections will be based.

The paper states that climate-related risks can affect companies’ credit ratings, but that it is uncertain whether these risks are sufficiently incorporated into rating agencies’ assessments. Therefore the Riksbank needs to take these risks into account when purchasing corporate bonds.

The report explains that the Riksbank is using negative screening – excluding purchases from companies which are deemed to be significantly at odds with international agreements such as the UN Global Compact or Guiding Principles on Business and Human Rights.