ESG Briefing: ESG risks material in one-third of Moody’s 2019 credit ratings

The week’s responsible investment news

Environmental and social issues are of growing importance in credit ratings, according to new analysis from Moody’s, which cites ESG risks as material in a third of its 7,637 private-sector rating actions last year. Of the ESG-linked rating actions, 88% mentioned governance, 20% referred to social issues and 16% cited environmental issues. Climate risk, including both transition and physical risk, is “taking on greater prominence in discussions of credit quality,” Moody’s said.

Some of the biggest ESG investment funds are outperforming the broader market during the coronavirus crisis, according to a new paper published by S&P Global Market Intelligence. S&P analysed 17 ESG exchange-traded and mutual funds with more than $250m under management and found that 12 have lost less value so far this year than the S&P 500. The top performer, the Brown Advisory Sustainable Growth Fund, had a negative 5.4% price change to April 9, compared to a 13.7% decline in the S&P 500 over the same period. Read the full report here. 

The Principles for Responsible Investment has hit 3,000 global signatories with over $89trn in assets, it announced in its Q2 2020 update – the highest annual growth of signatures in ten years. It is also consulting on its position paper Investing with SDG outcomes, which proposes a five-step framework for investors to contribute to the SDGs. The deadline for signatory feedback is April 24.

ASEAN green bond and loans almost doubled from 2018 to 2019, from $4.1bn to $7.8bn, according to a new report from the Climate Bonds Initiative. Green buildings topped the use of proceeds at 34%, followed by renewable energy at 33%. Globally, issuance rose by more than 50%, from $171bn to $258bn, with ASEAN issuance counting for 3% of the global total and 12% in Asia-Pacific.

German NGO Urgewald and a group of civil society organisations have sent a letter to World Bank directors urging them to intervene following the bank’s involvement in oil & gas development in Guyana. The World Bank Group recently provided Guyana with over $50m in public assistance for oil development. Urgewald have found conflicts of interest in the bank’s funding of independent contractors, including those linked to ExxonMobil.

Member association Swiss Sustainable Finance has launched an e-learning tool providing detailed explanations of how sustainability creates added value for companies and investors. The free tool “sustainable investments in a changing world”, is available in three languages and made up of four two-hour modules. It focuses on the role of investors and asset managers in encouraging sustainable business practices and how financial analysts can integrate sustainability information into their research to obtain a comprehensive picture of companies. 

JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup are planning to take direct ownership of failing oil & gas assets. The controversial move has been criticised by Sierra Club, an American grassroots environmental organisation. Ben Crushing, a campaign representative, said: “It's never been more obvious that fossil fuels are a bad investment, and yet rather than following their supposed commitments to climate action, these big banks are doubling down on their toxic investments and getting directly into the fossil fuel business.” The banks are reportedly awaiting regulatory waivers to move the plan forward.