The Principles for Responsible Investment (PRI) and the Société Française des Analystes Financiers (SFAF) continued their collaboration to further the understanding of how environmental, social and governance (ESG) factors impact credit risk analysis by hosting a workshop on 25 November, attended by the participants of the SFAF credit commission, buy-side investors, originators, credit rating agencies and five High-Yield (HY) companies (Atalian, Casino, CMA-CGM, iQera et Loxam).

ESG factors are important to assess the credit quality of borrowers and regulation is rapidly evolving. The Universal Registration Document, now harmonised at the EU level and requiring ESG data disclosure, is applicable from this year. The European Union’s Sustainable Finance Disclosure Regulation, which will come into effect in 2021, goes in the same direction.

During the first workshop on 2 December 2019, as part of the series Bringing credit analysts and issuers together), investors and investment grade issuers used sector guides to discuss how ESG issuers can impact company credit quality and, more broadly, their business models (see the highlights of the Paris workshop),

The objective of this new workshop was twofold: to explore how HY issuers consider ESG factors and the way they communicate on ESG topics (and their financial materiality) with credit analysts as well as understanding how analysts use this information. The workshop is part of the PRI’s ESG in credit risk and ratings initiative flagship programme.

The PRI and the SFAF credit commission intend to publish the main conclusions of the latest workshop at the start of 2021.

“It is important to make ESG data and financial publications converge,” says Barbara Cohen, president of the SFAF credit commission. “This event in the HY space allows analysts and borrowers to shape this evolution. It is about contributing to the construction of a global framework and a common language.”

“Providing a forum for discussion for credit analysts and borrowers, especially HY borrowers who often do not have the resources to meet the growing demand for ESG information, is key to reaching an agreement on the minimum level of ESG data disclosure,” says Carmen Nuzzo, Head of Fixed Income at the PRI. “Our collaboration with the SFAF will accelerate this effort.”