Making NDCs investable: What sovereign bond investors want from COP30

With only days to go until COP30 wraps up, more than 100 countries have submitted their Nationally Determined Contributions, setting out plans for reducing carbon emissions in line with the Paris Agreement. If implemented, global emissions could fall by around 12 per cent compared with 2019 levels over the next decade, according to the UN.

But for fixed income investors with net zero ambitions, the challenge remains how these commitments translate into meaningful investment signals. One organisation trying to close this gap is the TPI Centre, an independent research body which is part of the London School of Economics. Its State of the Sovereign Transition 2025 report, produced in collaboration with ASCOR (Assessing Sovereign Climate-Related Opportunities and Risks), provides key insights for sovereign debt investors.

Reviewing the climate performance of 85 high, middle and low income countries, the report covers around 90 per cent of global greenhouse gas emissions and GDP, as well as 100 per cent of four major government bond indices.

Following ASCOR methodology, the report examines historical emissions and targets at the national level, alongside policies, implementation frameworks and climate finance commitments. A key finding is that, although progress in the United States is declining, many low and middle income countries are catching up with higher income peers.

Pockets of progress

Key findings of the report were discussed at a COP30 event by the TPI Centre. Discussing the report in the Korea Pavilion, Antonina Scheer, deputy director for policy at the TPI Centre, said it leaves room for optimism: “When we separate out the US… we still see a net movement forward, improvement, new policies.”

However, she also stressed the urgent need for acceleration: “Emissions are not yet falling at the rate they need to, but if we look at the policies that are being put in place… there is significant improvement, especially for low and middle income countries.”

Carbon pricing is a case in point. Several Asian countries have recorded notable progress, while developments in some high income nations have slowed. “China has actually increased the coverage very significantly by including new sectors such as steel and cement. Korea and Japan are relatively stable from last year, but both are well above 50 per cent coverage,” Scheer noted.

Investable insights

These developments matter to investors, according to Claudia Gollmeier, head of investment management at London-headquartered fixed income manager Colchester Global Investors. Gollmeier, who also chairs the PRI Sovereign Debt Advisory Committee and co-chairs the ASCOR project, said collaboration with TPI has helped turn theoretical insights into practical tools for credit analysis.

As a fixed income investor, she pointed to three core considerations: policy credibility, financial transparency and the integrity of labelled instruments. “When you talk about investable NDCs, it is not just about ambition on paper. Investors need to see that a country’s climate targets are backed by legislation, budget allocation and implementation plans,” she said.

Gollmeier acknowledged that investors approach NDCs with caution: “Many countries are setting targets, but few are disclosing the cost of implementation or how they plan to fund it.”

On the rapid growth of green, social and sustainability (GSS) bonds, she issued a warning: “Labelled bonds are only investable if the KPIs are robust and aligned with national climate strategies.”

Index investor impact

For index investors, national climate data is increasingly central. Peter van der Werf, head of active ownership at Dutch asset manager Robeco, explained how ASCOR data feeds into the firm’s climate-tilted sovereign indices, which direct capital towards governments with stronger climate commitments.

“We have embraced ASCOR as a delivery mechanism for many of the insights we work with,” van der Werf said. “Year on year, we start to shift more weight into countries that are backing up their commitments with the climate finance that is needed.”

He described this as “a very innovative way of rewarding countries for better climate performance”.

ASCOR indicators are also used as the foundation for sovereign engagement, enabling investors to identify gaps and discuss possible policy improvements directly with government officials. This creates a feedback loop, van der Werf argued, in which better ASCOR scores lead to greater investor demand, which in turn strengthens climate incentives for sovereigns.