This is the fifth quarterly update compiled by the PRI to track the progress that credit rating agencies (CRAs) are making to enhance the transparent and systematic integration of ESG factors in credit risk analysis, in keeping with their commitment to the ESG in Credit Risk and Ratings Statement

The number of CRAs supporting the initiative continued to increase: 26 ones have signed the statement with DBRS Morningstar, HR Ratings and JCR LATAM adding to the list since the latest update. At the same time, the number of published reports related to ESG factors and credit risk was higher than ever. In Q1 2021, the focus was on environmental issues, particularly climate, energy transition, green bonds. The number of ESG-related rating actions and virtual events also remained significant.

The PRI’s purpose is to provide market participants with a comprehensive resource and be up-to date with the latest CRAs’ ESG-related activities. The information contained in the excel file below allows investors to use the CRA latest resources as a tool in their ESG integration process. It also allows CRAs to showcase their ongoing efforts to be more transparent about how ESG factors affect credit opinions and how research around ESG credit-relevant topics is improving. Finally, it creates opportunities to continue the investor-CRA dialogue that the PRI initiated through the ESG in Credit Risk and Ratings Initiative, now in its fifth year, and to discuss or challenge CRAs’ views.

This document is evolving and improving based on the feedback that we receive from its users. The current edition contains the items listed below. We publish mid-month to allow for the whole previous quarter to be covered.

  • Reports: a sample of research reports produced by CRAs related to ESG consideration (sectoral and thematic) and credit risk.
  • Rating actions: a selection of CRAs’ rating opinions that have ESG factors among the key drivers underpinning the ratings’ rationale or that contain a dedicated ESG paragraph.
  • Events: a list of events that have either been organised by CRAs or in which they have participated as speakers on ESG factors and credit risk.
  • Methodology notes: all information related to the CRAs’ methodology for integrating ESG factors in credit ratings. This will not have to be updated every quarter.

Please also refer to the first tab of the file for instructions on how to use it.

This is not a commercial platform for CRAs. It is also important to recognise that the CRAs supporting the initiative vary in size and are at different stages of their development in making ESG factors more explicit in their methodology, analysis and credit risk assessments. Not all of them will have regular quarterly inputs, and we are very grateful to those who have submitted their contribution this quarter.

The PRI hopes that you find this tool useful and welcomes comments on how it can be improved.

For questions please contact:

Carmen Nuzzo
Head of Fixed Income
carmen.nuzzo@unpri.org

Sixtine Dubost
Analyst, Investment Practices
sixtine.dubost@unpri.org