26 May 2016: Over 100 investors managing US$16 trillion in assets, along with six credit ratings agencies, have signed a Statement on Environmental and Social Governance (ESG) in Credit Ratings and Analysis, the UN-supported Principles for Responsible Investment (PRI) announced. Building on the investors’ and rating agencies’ commitments, PRI, the UN Environment Programme (UNEP) Inquiry and other partners have initiated a two-year programme to bring investors and credit rating agencies together to discuss the links between creditworthiness and ESG.

In the joint statement, the signatories recognize investors’ needs for greater clarity on how ESG factors are considered in credit analysis. To enhance systematic and transparent consideration of ESG factors in the assessment of creditworthiness, the signatories affirm their commitment to: evaluate the extent to which ESG factors are credit-relevant for different issues; publish their views on how ESG factors are considered in credit ratings; and review how ESG factors are integrated into credit analysis as understanding evolves. The signatories further commit to maintain organizational governance and resourcing to deliver quality ratings and ESG analysis, and to participate in industry-wide efforts to develop consistent public disclosure.

“Investors are paying close attention to how ESG factors are considered in the credit rating process,” said Michael Wilkins, S&P Global Ratings, one of the signatories. He explained that investors are aware of a “growing interest” in quantifying ESG factors, and said “we’re focused on closing the information gap” on the issues. Moody’s Corporation CEO Raymond McDaniel stressed consideration of ESG factors as increasingly important in the assessment of creditworthiness. He said Moody’s is working to incorporate evaluations of “all relevant and material factors” that could affect an issuer’s ability to repay its debts, including environmental risks.

Signatories also committed to participate in a dialogue to identify and understand ESG risks to creditworthiness. The two-year programme, funded by the Rockefeller Foundation, will bring crediting ratings agencies and investors together to participate in ratings forums around the world.

The UN-supported PRI initiative is an international network of investors working to put the six Principles for Responsible Investment into practice. By implementing the Principles, signatories contribute to developing a more sustainable global financial system. [UNEP Press Release] [PRI Press Release] [PRI Principles]