Overview

The State of the Sovereign Transition is a comprehensive report produced by the TPI Global Climate Transition Centre at the London School of Economics and Political Science (LSE). It serves as an independent and authoritative source of research and data concerning the progress of sovereign entities in transitioning to a low-carbon economy. This 2025 edition expands its assessment to 85 high-, middle-, and low-income countries, representing approximately 90% of global greenhouse gas emissions and GDP. The report is part of a flagship trilogy from the TPI Centre that also covers corporate and banking transitions. It is developed in partnership with the Assessing Sovereign Climate-related Opportunities and Risks (ASCOR) initiative, an investor-led project aimed at creating a transparent tool for evaluating national climate action.

Purpose

The report is designed to be a one-stop shop for investors to understand national climate performance and manage risks and opportunities arising from the transition. By providing robust and comparable data on sovereign climate preparedness, the assessment helps reduce market uncertainty and may improve the cost of borrowing for countries with credible transition plans. It is intended to inform investment decisions, particularly for sovereign bondholders, and to enable a more explicit consideration of climate change in financial analysis. Furthermore, the report facilitates constructive dialogue and engagement between issuers and investors, allowing sovereigns to demonstrate climate ambition and align their financing strategies with international goals like the Paris Agreement.

Methodology

The assessment utilizes the ASCOR framework, which is structured around three primary pillars: Emissions Pathways, Climate Policies, and Climate Finance. These pillars are divided into 14 thematic areas, featuring 38 binary performance indicators and 24 quantitative metrics. Pillar 1 examines historical and future decarbonisation trajectories, including interim 2030 and 2035 targets and long-term net zero commitments. Pillar 2 assesses the adoption of legal and regulatory instruments, such as climate legislation, carbon pricing, and adaptation plans. Pillar 3 focuses on international and domestic climate finance, evaluating transparency in climate costing and spending. The methodology incorporates the principle of common but differentiated responsibilities, providing indicator exemptions for specific income groups. Data is primarily drawn from publicly available sources, such as Nationally Determined Contributions (NDCs) and Biennial Transparency Reports (BTRs).

Use for Finance Professionals

Finance professionals and sovereign bondholders can integrate ASCOR data into their credit analysis to identify climate-related risks and investment opportunities. The tool’s structure enables peer group comparisons and income-level adjusted benchmarking, supporting more informed decision-making across global bond indices. It aligns with the Net Zero Investment Framework (NZIF), allowing investors to guide climate-informed portfolio strategies and systematically incorporate environmental factors. Professionals can use the granular data to interrogate specific elements of national climate action, such as sectoral transition plans or renewable energy pipelines. Additionally, the framework serves as a valuable engagement tool for both bilateral and collaborative dialogues with policymakers, helping to identify policy gaps and track the implementation of sovereign climate commitments.