PARIS (S&P Global Ratings) Feb. 11, 2020--S&P Global Ratings today announced that it has published ESG Industry Report Cards across the corporates, infrastructure, banks, insurance, and supranationals sectors, as well as project finance (see list under Related Research).
These report cards cover close to 70 subsectors and more than 1,250 individual entities. We intend to update these environmental, social, and governance (ESG) insights on the entities listed as well as others where relevant to credit, throughout the year in individual entity analyses, as we expect companies to increasingly focus on ESG in their communication and strategy updates.
Our ESG report cards qualitatively explore the relative exposures (average, below, above average) of sectors to environmental and social credit factors over the short, medium, and long term. In addition to our sector views, the reports list ESG comparative insights for individual companies, including how and why ESG factors may have had a more positive or negative influence on an entity's credit quality compared to sector peers or the broader sector.
We expect greater impacts from physical climate change and (primarily governmental) policies to significantly evolve over the next decade, though the exact form, timing, and impact of policy changes is difficult to precisely gauge. However, we believe new international disclosure practices, such as those recommended by the Task Force on Climate-Related Financial Disclosures and Climate Disclosure Project, could make evaluating environmental credit factors easier.
Corporates And Infrastructure
The EU already announced ambitious objectives for renewables to account for at least 32% in final energy consumption by 2030 and a net-zero carbon target by 2050 (see "EU Green Deal: Greener Growth Doesn't Necessarily Mean Lower Growth," published Feb. 10, 2020). China has pledged to cut the carbon intensity of its economy by 60%-65% by 2030 (from 2005) and increase nonfossil fuels in primary energy consumption to around 20%. While U.S. federal efforts may have slowed, significant transformation is happening at the state level as renewables keep growing at the expense of further sharp declines in coal. In general, substantial industrial and consumer adjustments will be needed to achieve a 2-degree Celsius scenario. (The 2-degree scenario is widely seen as the global community's accepted limitation of temperature growth to avoid significant and potentially catastrophic changes to the planet.)
Our ESG analysis goes well beyond emissions, as environmental factors such as waste, water, and land use gain importance. Social drivers have also come to the forefront, with safety, health, and community effects--not least the consequences of the recent coronavirus--showing their importance to credit quality. Governance and broader stakeholder interests can have significant financial consequences, be it through penalties or fines, or indirectly through customer rejection. These factors may be less predictable, or low probability but high severity.
ESG factors are becoming increasingly relevant for the banking industry, reflecting heightened scrutiny from multiple stakeholders as well as evolving regulatory and operational environment, with associated risks and opportunities for individual banks. Whereas topics like climate change, treating customers fairly, ensuring proper governance, and transparency rank increasingly higher on many boards' agendas, embedding ESG considerations into business settings or risk frameworks takes time, especially in determining how banks will support the transition to a carbon-neutral economy. These efforts are already gaining traction and there is a greater need for transparency for investors, regulators, and society about what large banks do, commit to do, or are reluctant to do. Cases where environmental and social factors influence rating actions are still rare because we need to put these initiatives in the context of group exposures. Governance considerations, however, are more likely to influence the credit quality of rated banks, especially recent or pending cases of governance-related controversies and previous regulatory, tax, compliance, or legal infractions.
Insurance companies have long been on the forefront of understanding and managing risks like climate-related issues or the changing regulatory landscape, as well as emerging and operational risks. The ESG risks insurance companies face directly through their own operations include treating their customers fairly, ensuring proper governance and transparency, and enabling gender equality in their workforce. And in their role as risk carriers, they assume their counterparties' exposure to risks through their investment portfolios and insurance liabilities. In many cases, the indirect sources of ESG risk (such as those originating from their product offerings, underwriting activities, and investment portfolios) can be more material than the direct sources. While many insurers worldwide have been proactively expanding their responsible investing, underwriting, and product offerings, we believe the main challenges when trying to evaluate issuers is the often inconsistent and currently limited disclosure.
These institutions face closer scrutiny as their role in advancing environmental and social objectives becomes more tightly integrated with their mandates and practices. Because environmental and social goals support supranationals' public policy roles and governance, ESG factors often support ratings and increasingly act as key rating differentiators. Supranationals have pioneered and continue to foster the development of sustainable capital financing, which boosts their access to funding and highlights their environmental and social roles.
To learn more, please join analysts from our infrastructure, financial services, and supranationals teams for a live interactive webcast and Q&A on Feb. 27, 2020, at 9:30 a.m. Eastern Standard Time/2:30 p.m. Greenwich Mean Time/3:30 p.m. Central European Time, where they will provide their views on the report cards. Click below to register.
Americas and EMEA: https://event.on24.com/wcc/r/2185263/D1DCEE171167F7BCBCFB71732CA76BF9
The publication of these ESG report cards is part of our greater disclosure efforts for investors. S&P Global Ratings incorporates ESG considerations into its ratings methodology and analytics, which enables analysts to factor in short-, medium-, and long-term impacts--both qualitative and financial--to multiple steps of their credit analysis (see "The Role Of Environmental, Social, And Governance Credit Factors In Our Ratings Analysis," published Sept. 12, 2019).
Further research and information on how ESG factors are incorporated into S&P Global Ratings' analyses can be found here: https://www.spglobal.com/ratings/en/products-benefits/products/esg-in-credit-ratings.
- How ESG Factors Have Begun To Influence Our Project Finance Rating Outcomes, Jan. 27, 2020
- The Role Of Environmental, Social, And Governance Credit Factors In Our Ratings Analysis, Sept 12, 2019
- How Management & Governance Risks And Opportunities Factor Into Global Corporate Ratings, Nov. 7, 2018
- How Environmental, Social, And Governance Factors Help Shape The Ratings On Governments, Insurers, And Financial Institutions, Oct. 23, 2018
ESG Industry Report Cards
- ESG Industry Report Card: Aerospace And Defense
- ESG Industry Report Card: Autos And Auto Parts
- ESG Industry Report Card: Building Materials
- ESG Industry Report Card: Business and Consumer Services
- ESG Industry Report Card: Capital Goods
- ESG Industry Report Card: Chemicals
- ESG Industry Report Card: Consumer Products And Agribusiness
- ESG Industry Report Card: Containers And Packaging
- ESG Industry Report Card: Engineering And Construction
- ESG Industry Report Card: Forest And Paper Products
- ESG Industry Report Card: Health Care
- ESG Industry Report Card: Leisure
- ESG Industry Report Card: Media And Entertainment
- ESG Industry Report Card: Metals And Mining
- ESG Industry Report Card: Midstream
- ESG Industry Report Card: Oil And Gas
- ESG Industry Report Card: Power Generation
- ESG Industry Report Card: Real Estate And Homebuilders/Developers
- ESG Industry Report Card: Regulated Utilities Networks
- ESG Industry Report Card: Retail
- ESG Industry Report Card: Technology
- ESG Industry Report Card: Telecoms
- ESG Industry Report Card: Transportation
- ESG Industry Report Card: Transportation Infrastructure
- ESG Industry Report Card: U.S. And Canadian Banks
- ESG Industry Report Card: North American Insurance
- ESG Industry Report Card: EMEA Banks
- ESG Industry Report Card: EMEA Insurance
- ESG Industry Report Card: Supranationals
- ESG Industry Report Card: Asia-Pacific Banks
- ESG Industry Report Card: Asia-Pacific Insurance Companies
- ESG Industry Report Card: Latin American Banks
This report does not constitute a rating action.
The reports are available to subscribers of RatingsDirect at www.capitaliq.com. If you are not a RatingsDirect subscriber, you may purchase copies of these reports by calling (1) 212-438-7280 or sending an e-mail to email@example.com. Ratings information can also be found on S&P Global Ratings' public website by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request copies of these reports by contacting the media representative provided.
|Primary Credit Analysts:||Karl Nietvelt, Paris (33) 1-4420-6751;|
|Gregg Lemos-Stein, CFA, New York (44) 20-7176-3911;|
|Nicole D Delz Lynch, New York (1) 212-438-7846;|
|Pierre Gautier, Paris (33) 1-4420-6711;|
|Lawrence A Wilkinson, New York (1) 212-438-1882;|
|Patrice Cochelin, Paris (33) 1-4420-7325;|
|Secondary Contacts:||Michael Wilkins, London (44) 20-7176-3528;|
|Bernard De Longevialle, Paris (33) 1-4075-2517;|
|Media Contacts:||Jeff Sexton, New York (1) 212-438-3448;|
|Armelle Sens, Paris (33) 1-4420-6740;|
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