In this paper, GMO proposes a novel approach to financing emerging countries’ transitions toward cleaner energy production. Indeed, we believe a significant opportunity exists across two dimensions: greenhouse gas (GHG) emissions reduction and investment returns.

Born of the Global Financial Crisis, additional tier-1 securities were designed to absorb bank losses in times of turbulence and maintain financial safety at no cost to taxpayers. Despite good intentions, we’ve found AT1s to be flawed instruments that are contingently junior to common equity in practice.

An alpha-oriented approach.

In August 2020, as the global pandemic was straining emerging countries’ ability to make debt payments, we published a white paper – “Sovereign Contingent Bonds: How Emerging Countries Might Prepay for Debt Relief” – introducing the concept of “sovereign coco bonds,” a way for countries to structure bond agreements to allow for more flexible policy options in the face of a crisis.

In a new white paper, Mustafa Ulukan and Sergey Sobolev from GMO’s Emerging Country Debt Team examine the notable rise of State-owned Enterprises (SOEs) in international capital markets since the Global Financial Crisis.

Emerging countries have been in the midst of a crisis that is not of their own making. A great majority of these countries are navigating the crisis fairly well.

State-owned enterprises (SOEs) account for much of the emerging market corporate debt universe, and with fundamentals weak relative to history, there are concerns about the impact of rising rates on these corporations. In a new GMO Emerging Debt Insights, Mustafa Ulukan explores these concerns.