Nguyen Minh Phuong LE attended the 2021 Vietnam Symposium in Banking and Finance (VSBF2021), to be held on 28-30 October 2021 (virtual conference).
He presented the paper entitled Importance of ESG Factors on the Sovereign Credit Ratings, co-written with Edouard PINEAU, Remy ESTRAN.
Abstract: Current studies have raised the importance of Environment, Social and Governance (ESG) information for assessing debt issuers’ creditworthiness. This paper provides a simple data-driven methodology to observe this importance in real sovereign ratings published by rating agencies. To do so, we build ESG and non-ESG indices using factor analysis, and use them as inputs for a statistical supervised rating model from which we can compute variable importance scores. Using this two-step method, we compare the relative importance of ESG and non-ESG indices underlying their ratings in advanced and emerging economies, at different timesteps. We find that using ESG variables to explain sovereign risk is more important for advanced economies, compared to emerging markets. In addition, we observe the evolution of ESG importance over time, growing for advanced economies and decreasing for emerging markets