ESG rating agencies dodge abortion rights issue following US Supreme Court leak

Providers of ESG ratings are reluctant to publicly address the controversial issue of abortion rights in the US, Responsible Investor has found.

Following the leak of a draft Supreme Court opinion which suggested that the landmark Roe v Wade legislation could be repealed, Responsible Investor asked six major ESG rating agencies how abortion rights are integrated into their corporate and sovereign sustainability scores.

The only entity willing to comment publicly on its position was MSCI. A spokesperson said the group’s ESG research division identifies companies manufacturing abortifacient products – abortion pills – and those owning or operating facilities where abortions are performed. “Clients can use these data sets to positively or negatively screen these companies in their portfolios,” the spokesperson said.

Faith-based funds are known to avoid investing in healthcare companies that manufacture and produce abortion pills or own clinics where abortions are performed.

In contrast, some socially responsible investors in the US actively support women’s rights to abortion in engagements with companies.

In the past year, Republican lawmakers across the country have passed or proposed legislation that would severely restrict women’s ability to access legal terminations. If Roe v Wade is overturned, 26 US states are set to ban abortion as soon as practicable.

In response, large US-listed companies including Citigroup, Apple, Amazon and Levi Strauss have extended employee healthcare benefits to cover travel costs for those seeking an abortion.

Asked whether MSCI is considering expanding its screening capacity to include corporates which offer these extended benefits, the spokesperson said: “The situation in relation to Roe vs Wade is still evolving. We will monitor client feedback on this topic and consider options for capturing companies’ practices in relation to abortion services as appropriate.”

Despite including abortion screening in its client offering, MSCI said the provision of abortion products or services is “not considered” in its in-house ESG ratings methodology.

A rating agency source who wished to remain anonymous told Responsible Investor that, from their perspective, access to abortion and reproductive health sits under the umbrella of human rights when measuring credit as well as ESG ratings. It would be unlikely for abortion to be financially material enough to have an impact on a credit rating, the source said. However, from an ESG ratings perspective, the issue could lead to lower sub-scores for human rights when taking into account social factors and their impact.

Whether a reversal of Roe v Wade would have repercussions for the sovereign ESG rating of the US is unclear.

MSCI said that its sovereign ESG ratings are driven by “defined quantitative methodologies”, using data from external sources such as the World Bank and non-profits such as Freedom House.

Civil liberties are one of many topics included in MSCI’s governance assessment, which also includes Freedom House’s civil liberties score. In its methodology, Freedom House asks questions about birth control rights but also covers issues such as rights of expression, privacy, security and marriage within the same aggregated score. “At this point in time, we would not know how recent reports would affect the US’s broader civil liberties score on such external indicators,” stated the MSCI spokesperson.

The spokesperson added that the intention of sovereign ESG ratings is to assist the investment process with a long-term country risk-assessment tool, which might be used as a supplement to macroeconomic data or credit ratings.

Sustainalytics, Moody’s and S&P Global did not respond to several requests for comment. Fitch declined to comment prior to legislative outcomes and Refinitiv acknowledged Responsible Investor’s request but did not provide a comment ahead of publication.