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How sustainable is EM sovereign risk?

ESG issues are part of the package with emerging market sovereign bonds.

Protest against Belarusian President Alexander Lukashenko's regime in London
Protestors against president Alexander Lukashenko's regime demanded the LSE delist Belarusian sovereign bonds.
Photo: Hannah Mckay/Reuters

On August 9, the first anniversary of the rigged elections in Belarus that prompted a ferocious crackdown by authorities, the UK government joined the European Union in imposing sanctions on new Belarusian sovereign debt.

A fresh round of US sanctions on Belarus announced on the same day failed to mention sovereign debt. Nevertheless, the direction of travel was clear and, for the moment at least, the Belarusian regime is effectively cut off from raising funds on international bond markets.

This may or may not rattle president Aleksandr Lukashenko, who can count on grudging but sufficient financial support from Moscow in his brutal suppression of dissent. But it might come as some relief to emerging market fund managers, who will now be spared the labour of accounting for their participation in a new Belarusian sovereign deal.

Unfortunately, they are unlikely to be allowed to forget their involvement in the last one. Over the past year, commentators have repeatedly asked how funds can square claims to environmental, social and governance (ESG) awareness with their decision to buy $1.25

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