Credit ratings agencies embrace more systematic consideration of ESG
STRONG SUPPORT FROM FIXED INCOME INVESTORS FUELS MOMENTUM
LONDON, 26 May 2016 – Leading credit ratings agencies are joining an initiative to look at environmental, social and governance (ESG) factors in a more systematic way, the PRI announced today. To kick-start that initiative, 100 investors managing US$16 trillion of assets, and six credit rating agencies have signed a Statement on ESG in credit ratings.
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. The project has been initiated by the PRI with support from the UNEP Inquiry and a committee of PRI signatories, which include some of the world’s largest fixed income investors.
“Credit rating agencies are a crucial part of the puzzle for identifying systemic ESG risks in debt capital markets,” said Fiona Reynolds, managing director of the PRI. “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.”
“This joint statement by ratings agencies and investors marks another important step towards a sustainable financial system,” said Nick Robins, co-director of the UNEP Inquiry.
There is no doubt that strong support from the investor community shows they realise the materiality of ESG issues in relation to issuer creditworthiness.
“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,” said Michael Wilkins, managing director and head of environmental and climate risk research at S&P Global Ratings. “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.”
“We support the PRI’s goal of developing a market dialogue to ensure the transparent consideration of ESG factors in the assessment of creditworthiness,” said Raymond McDaniel, President and Chief Executive Officer of Moody’s Corporation. “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.”