Government Bonds to Reflect Ecological Footprint

Alejandro Litovsky

July 1, 2009

The Swiss investment firm Pictet Asset Management is gaining traction with a new type of bond fund. It rates countries based on their ability to provide a high quality of life at a minimal ecological cost.

Pictet is the first bank worldwide to join the Global Footprint Network, a move that strengthens GFN’s strategic vision of their Pathways to Scale, as I reported earlier this year in an interview with its founder, Mathis Wackernagel.

Through the partnership, Pictet aims to benefit from GFN’s easy-to-use metrics and their endorsement by both government bodies and environmental organisations such as the WWF.

The countries that receive the highest bond ratings are those which, according to the Pictet Sustainability Expert, Christoph Butz, are able to create “the highest standard of living per unit of nature.”

Pictet’s rating system is based on a ratio of resource consumption – as measured by the Ecological Footprint — to standard of living as measured by United Nation’s Human Development Index, a measure that compares countries on its citizens’ achievement of long lives, literacy, income and other factors.

While traditional bonds tend to flow investment to countries whose citizens have the highest incomes and place the greatest per-capita pressure on global resources, this fund directs capital to those countries that are developing along a sustainable path, Butz says.

He adds that the new sustainable bond rating is not just for a few green outsiders but is already fully implemented in client portfolios, for instance for Geneva-based Ethos, an investment foundation that regroups over eighty small and large Swiss pension funds. Pictet also intends to incorporate footprint data into their country-level research, further opening up the pathways to scale of ecological footprint metrics.