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Does the global financial system need robust credit ratings that incorporate rigorous assessment of all material credit considerations, including ESG factors? Should credit ratings cover a useful time horizon, rather than just a few years? Should credit rating companies activate processes to overhaul all credit rating methodologies for all sectors around the world as soon as possible?
NO, NO, and NO, says credit rating agency Moody’s Investors Service. According to its recent request for feedback on a proposed methodology update for ESG risks, what the world really needs now is for Moody’s to (1) leave credit rating analysis alone; and (2) festoon bond issuers and structured finance deals with four new stand-alone ESG scores.
In short, Moody’s proposes more of its same credit ratings that ignore many material credit ex…