As has already been said the Sovereign provides unrest to the city he is currently in (not only the capital). So the city hosting the sovereign will have -15% unrest.
Other benefits include, as has also been said, +0.5 growth per level. This benefit is gained no matter where the Sovereign is at the moment, and at the early game can make a big difference. Just send the sovereign to kill nearby monsters and he hopefully will level up a few levels and boost original growth, giving you am early advantage (or perhaps allowing you to catch up with other nations who did the same).
The sovereign also gives your faction +2 mana each turn and his abilities in addition to the kingdom/empire and race abilities make for a different play style in each faction.
