Fitch Ratings Inc. is launching a new scoring system to show how environmental, social and governance factors affect individual credit rating decisions.
Fitch is rolling the ESG relevance scores out across all asset classes, starting with non-financial corporate ratings, followed by banks, non-bank financial institutions, insurance, sovereigns, public finance, global infrastructure and structured finance.
According to Fitch, the initial analysis of its corporate portfolio has generated more than 22,000 individual environmental, social and governance scores for its publicly rated entities, with initial results showing 22 per cent of its current corporate ratings are being influenced by these factors. It notes there are significant variances by market classification, geography and sector.
“Our focus is purely on fundamental credit analysis and so our ESG Relevance Scores are solely aimed at addressing ESG in that context,” said Andrew Steel, global head of sustainable finance at Fitch in a press release. “The scores do not make value judgements on whether an entity engages in good or bad ESG practices, but draw out which E, S, and G risk elements are influencing the credit rating decision.”