Stiglitz Among Fans of Exclusive Club: High-Yielding Do-Gooders

(Bloomberg) -- Count Joseph Stiglitz among the fans of a rare but bonafide club: High-yielding developing nations that also score well in environmental, social and governance standards, or ESG.

The Nobel Prize-winning Columbia University economist praised Costa Rica in a blog post today as a "world leader" in policies that promote democratic, sustainable and inclusive economic growth. As a member of the so-called Wellbeing Alliance, the Central American nation has been at the forefront of progressive causes from reforestation to human rights.

Similar attributes have also caught the attention of Bank of America Merrill Lynch strategists David Hauner, Andrew MacFarlane and Jane Brauer. They wrote in a note Monday that Costa Rica, as well as Tunisia and Sri Lanka, rank among the more attractive emerging markets due to their combination of alluring yields and strong ESG scores.

"Countries which offer high spreads/yields but have higher ESG scores (particularly the E and S factors) may thus make attractive investments in time," Hauner, MacFarlane and Brauer wrote.

That’s not to say everything is sunny for those nations.

The bank noted that some high-yielders with positive ESG scores face pressure on their credit rating profiles. And as Stiglitz pointed out, fractured politics in Costa Rica’s two-party presidential system can pose a hurdle to further championing progressive causes and fiscal discipline.

"In a fast-changing world, political gridlock can be costly," wrote Stiglitz, who isn’t one for investment recommendations. "Deficits and debts can explode, with no path towards resolution."

To contact the reporter on this story: Ben Bartenstein in Lima at bbartenstei3@bloomberg.net.

To contact the editors responsible for this story: Rita Nazareth at rnazareth@bloomberg.net, Alec D.B. McCabe

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