Credit Ratings Sign Up to Systematic ESG Initiative

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Some of the leading credit ratings agencies are joining a new project which evaluates the environmental, social and governance (ESG) factors more systematically. One hundred investors, who collectively manage $16 trillion of assets, and six credit rating agencies have already signed a Statement on ESG in Credit Ratings. The project, initiated by the PRI with support from the UNEP Inquiry and a committee of PRI signatories, includes some of the world’s largest fixed income investors.

The credit ratings agencies taking part in the initiative include S&P Global Ratings, Moody’s, Dagong, Scope, RAM Ratings and Liberum Ratings.

The launch of the statement marks the start of a two-year programme funded by The Rockefeller Foundation to bring investors and credit ratings agencies together in a series of ratings forums around the world to discuss the links between ESG and creditworthiness.

Fiona Reynolds, managing director of the PRI said: “Credit rating agencies are a crucial part of the puzzle for identifying systemic ESG risks in debt capital markets. By signing this Statement, these organisations are affirming their commitment to more systematic and transparent consideration of sustainability and governance factors in credit ratings and analysis.”

Nick Robins, co-director of the UNEP Inquiry said: “This joint statement by ratings agencies and investors marks another important step towards a sustainable financial system.”

There is no doubt that strong support from the investor community shows they realise the materiality of ESG issues in relation to issuer creditworthiness.

Michael Wilkins, managing director and head of environmental and climate risk research at S&P Global Ratings said: “Investors are paying close attention to how ESG factors are considered in the credit rating process – that’s clear from the number of investors who have signed this statement.

“We’re keenly aware of this growing interest in quantifying environmental, social and governance factors, and we’re focused on closing the information gap and deepening our analysis on these issues.”

Raymond McDaniel, President and Chief Executive Officer of Moody’s Corporation said: “We support the PRI’s goal of developing a market dialogue to ensure the transparent consideration of ESG factors in the assessment of creditworthiness.

“This is an increasingly important issue for market participants, and aligns with Moody’s work to incorporate evaluations of all relevant and material factors that could affect an issuer’s ability to repay its debt obligations – including assessments of environmental risks.”

You can download the statement here