Paving the path to sustainability
To facilitate long term, sustainable growth, it is imperative to analyze the environmental, social and governance (ESG) performance of companies and examine how activity in the markets influences the world in which we live.
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How can ESG Factors Affect Credit Ratings?
Read the researchEnvironmental, social, or governance factors can influence the capacity and willingness of issuers to meet financial commitments.
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The Energy Transition And COVID-19: A Pivotal Moment for Climate Policies and Energy Companies
Read the researchThe COVID-19 pandemic has drawn increased attention to climate policy and economic resilience.Policy support for clean energy and decarbonization is leading to significant upside to renewables additions in Europe.
Environmental, social, or governance factors can influence the capacity and willingness of issuers to meet financial commitments. S&P Global Ratings incorporates these considerations into its ratings methodology and analytics, which enables analysts to factor in short-, medium- and long-term impacts--both qualitative and financial--into their considerations at a number of points in their credit analysis.
Watch: Credit Ratings Explained
European Response
A Green Safe Asset
The European Commission has already expressed its desire to finance the recovery fund through debt issuance because member states' contributions to the EU budget only cover the multiannual framework. Given its strong commitment to finance a green recovery, and subject to concrete plans to do so, it is possible that 30% of the EU's recovery bond issuance could be labelled "use of proceeds" green bonds, that is, where issuance proceeds are earmarked for projects that aim to make a specific environmental contribution. In this way, the EU would be able to respond to a fast-rising ESG investor base and further develop its position as an issuer in the green bond market. Google Trends, which shows how frequently certain search terms are entered into its search engine relative to the site's total search volume, highlights that the search for ESG investments and green finance has soared in the past years (see chart 1).
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ESG in Credit Ratings
S&P Global Ratings has long considered Environmental, Social, and Governance (ESG) factors in its credit ratings, and we capture ESG factors in many areas of our methodology.
Corinne and Mike delve into the five of the hottest ESG-related topics set to permeate 2021, sourced from S&P Global Ratings' sustainable finance team around the globe.
As the pandemic persists, questions about equitable vaccine distribution continue to highlight the social divide and show that the fight for equality is far from over.
Climate action, which had been on the back burner in 2020, will come back to forefront as countries and companies double-down on net-zero goals and start to address the biodiversity crisis.
The sustainable debt market and transition finance will expand to enable these shifts in the "race to resilience."
ESG Pulse:
From April to September, we took close to 2,100 ESG-related rating, CreditWatch, and outlook actions. Of these, 775 were downgrades, the bulk (96%) of which stemmed from the COVID-19 pandemic, while governance concerns contributed to downgrades on 23 entities and environmental factors to six.
Sovereigns and international public finance remain percentage-wise among the sectors most directly affected by COVID-19, with 25% and 17% of the rated universe affected. Governance often has a differentiating influence in this respect.
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Stakeholder Capitalism:
Aligning Value Creation With Protection Of Values
The Greening Of Financial Services: Challenges For Bank And Insurance Green And Sustainability Hybrids
Issuing green or sustainability-linked hybrids helps banks and insurers spotlight their environmental, social, and governance (ESG) strategies, but investors are still exposed to the risks of the broader businesses.
The increasing frequency of cyber attacks and the potential for rapid deterioration in credit profiles after an attack are risk factors that are relevant for our rating assessments now.
Learn More HereESG Evaluations
LONDON (S&P Global Ratings) April 7, 2020--S&P Global Ratings has reviewed its portfolio of six public Environmental, Social, And Governance (ESG) Evaluations in light of the COVID-19 pandemic and has left all scores unchanged for now. We will continue to monitor the portfolio.
ESG Evaluations are our view of an entity's capacity to operate successfully in the future and may be affected by the risks and disruptions caused by COVID-19. The ESG Evaluation comprises two assessments: the ESG profile considers near-term and observable risks and opportunities, and an entity's preparedness considers its ability to manage emerging, disruptive, and strategic risks. We consider this pandemic to be a social risk that could affect our view of the ESG profile of an entity--particularly the social profile--and a disruption that could affect our view of an entity's preparedness. We may revise our opinion of an entity's ESG profile and preparedness, and adjust our ESG Evaluation score appropriately. These adjustments could be either negative or positive, and would take into account the management team's efforts to mitigate the risks posed by COVID-19.
Green Evaluations
S&P Global Ratings can provide a second party opinion on a company’s framework or issuance’s alignment with the Green Bond Principles or Green Loan Principles.
ESG Evaluation
S&P Global Ratings ESG Evaluation is a one of a kind assessment of a company’s ESG strategy and ability to prepare for potential future risks and opportunities.