S&P Global Ratings Update On ESG Credit Indicators
New ESG credit indicators no longer published in credit reports. Distinguishing between credit ratings and ESG ratings is a challenge.
S&P Global Ratings – the division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities – announced (on this page) that effective immediately it would no longer publish new ESG credit indicators in their credit reports or update outstanding ESG credit indicators.
This is because these indicators created confusion for investors using the credit rating information and S&P Global Ratings determined that the dedicated analytical narrative paragraphs in their credit rating reports were “most effective at providing detail and transparency on ESG credit factors material to [their] rating analysis”. S&P Global Ratings defines ESG credit factors “as those ESG factors that can materially influence the creditworthiness of a rated entity or issue and for which we have sufficient visibility and certainty to include in our credit rating analysis”.
The statement indicates that this change does not affect S&P Global Ratings’ ESG principles criteria or the influence that ESG factors can have on creditworthiness. While it’s not mentioned in the statement, we can only assume this also does not affect the ESG evaluations and ratings produced by another division, S&P Global Sustainable1.
Distinguishing between credit ratings and ESG ratings is hard enough (here’s a great resource to untangle them). It gets even harder when zealous headlines refer to the end of S&P ESG scores… which for some may just be wishful thinking.