If you open up the papers lately, you’ll find the discussion of the sovereign debt crisis tends to focus narrowly on offending nations’ profligate spending and borrowing habits. While these behaviors have no doubt contributed to fiscal deficits, what is often overlooked is that addressing another kind of deficit--an ecological one--is of equal importance if nations are to sustain healthy and resilient economies. One bank is working to advance this notion by incorporating into its sustainability rating of sovereign debt a country's resource efficiency.
Bank Sarasin, a Swiss private bank founded in 1841, launched the first investment fund based on the concept of eco-efficiency in 1994 and has been including social factors in its sustainability ratings since 1997. Sarasin’s sustainability rating of sovereign debt assesses a country’s creditworthiness based not only on resource availability but also on resource efficiency. Viewing a country’s ability to repay its debt over the long-term through this holistic prism yields some noteworthy results: resource-rich but inefficient economies such as the United States and Russia appear particularly vulnerable to future rating downgrades while resource-scarce but efficient countries like Japan, the Netherlands, and Germany appear much less at risk.