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An investment management firm streamlines municipal surveillance and climate risk assessment


An investment management firm needed to upgrade its credit and climate workflow processes. By working with S&P Global Market Intelligence, the firm was able to understand the creditworthiness of their municipal investments and the impact of climate risk and potential economic loss from natural hazards.

This firm oversees a suite of U.S. Public Finance mutual funds with $950 million assets under management. Growth in assets put strong pressure on the credit team for new investment originations and surveillance for existing holdings. Their credit models were not re-calibrated in several years, leading to inefficient manual overrides for new investments. For surveillance, the data collection and spreading were mostly manual, leading to an inefficient process. The emergence of climate risk as a key investment criterion added an additional challenge. Meanwhile, the company was under pressure to keep staffing levels at or near current levels. Given the importance of these challenges, the company was interested in upgrading its credit and climate workflow processes. By working with S&P Global Market Intelligence (Market Intelligence), the company achieved its goals:

  • Streamline its credit and climate data collection, and credit scoring process.
  • Understand the creditworthiness of their municipal investments by using a CUSIP-driven credit scoring model.
  • Better understand the impact of climate risk and potential economic loss from natural hazards.
  • Maintain existing staffing levels and focus the incremental efficiency gains on growing their business. 

Pain Points

The Investment team was looking for incremental changes to enhance their workflow. Business was growing, but they wanted to keep staffing at current levels. Their challenges included:

  • Cumbersome surveillance process: The process the company used to conduct annual reviews of their investments was manual and time consuming.
  • Lacked an understanding of climate risk: The company did not have the data or process to assess the impact of climate or physical risk for its municipal investments.
  • Internal credit models were not annually recalibrated: Since the company’s credit models were not annually recalibrated and updated, they were not reflective of the current rating agency methodology. Consequently, they were generating credit results that had material credit scores different than the public ratings. This resulted in time consuming manual overrides. 
  • Insufficient data coverage: The company was spending more time trying to obtain and spread the necessary data than it was conducting the analysis.
  • Gaps or lack of expertise for certain public finance segments: The company did not pursue certain public finance segments given they did not have the credit expertise for those areas and did not have the appropriate segment specific credit models (e.g., higher education, healthcare, housing, general obligation, transportation, water & sewer).

The company’s Public Finance team evaluated the Market Intelligence’s Public Finance Automated Scoring Tool (PFAST) and felt this solution would address its needs.

The Solution

Market Intelligence recommended PFAST, an Excel-based suite of Market Intelligence Credit Assessment Scorecards that is both an automated credit scoring and data solution enabling users to:

Assign credit scores to the vast majority of the company’s municipal customers

PFAST offers broad Public Finance sector coverage, including:

  • General Obligation issuers or states, cities, counties, and school districts
  • Water and Sewer utilities
  • Not-for Profit Health Care including health care systems and hospitals
  • Not-for-Profit Higher Education including private and public/state institutions 
  • Transportation including airports, mass transit, toll roads, bridges, and tunnels
  • Housing including single- and multi- family agencies

Understand climate risks of investments

Understanding an investment’s susceptibility to 18 different natural hazards and potential economic loss from those natural disasters will help you better and more proactively manage your clients. PFAST also includes a quantitatively based summary environmental/social score for every municipal entity where data is available.

Differentiate your firm from your competitors by providing credit and climate insights

PFAST provides credit and climate findings that can be used in your analyses. Leverage our ability to create local, regional, and national benchmarks given our vast database of both rated and unrated issuers.

Automate the spreading for all S&P rated General Obligation, Water & Sewer, Healthcare, Higher Education and Airport Obligors
Market Intelligence has collected more than three years of financial and economic data for all rated general obligation issuers, water & sewer, healthcare, higher education, and airports.  The data and credit scoring are fully automated by simply using an identifier (CUSIP or S&P Capital IQ ID).

Monitor your customer credit quality in minutes
By simply inputting an identifier a user can generate overall credit risk scores for your complete public finance customer portfolio.

Conduct scenario analysis
Additional functionality for conducting “what-if” scenario analysis for your municipal portfolio.

Key Benefits

The PFAST solution provides an automated credit scoring tool for all U.S. cities, counties, and school districts and water and sewer utilities. A similar approach is also available for the major rated revenue bond segments. Key benefits include:

  • Broad scope of application with sector-specific credit scorecards and data for General Obligation and Revenue Bonds including Water and Sewer, Not-For-Profit Healthcare, Not-For-Profit Higher Education, Transportation and Housing.
  • Climate Risk data and scores that identifies the susceptibility and potential economic from 18 different natural hazards fully mapped to every U.S. county.
  • Productivity gains with the automated data collection and credit scoring of nearly all cities, counties, school districts, special purpose districts, water & sewer utilities including unrated entities.
  • Methodology transparency of the Scorecard including all risk factors, weights, benchmarks, and scoring algorithms.
  • Training and ongoing analytical assistance to help groups understand the range of available capabilities and continue to get the most out of the solutions.
  • Quickly get up to speed in public finance credit analysis with our easy-to-use Scorecard User Guides and 24/7/365 support from our global customer support team.
  • Validation support through annual technical documentation that explains Scorecard methodology and testing.
  • Extensive coverage and continually growing database of municipal entities financials and economic data.

Click here to learn more about the Public Finance Automated Scoring Tool (PFAST), mentioned in this case study.

Learn more about Public Finance Automated Scoring Tool (PFAST)

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