Nov 30

Fitch Group Introduces ESG Ratings Amid Market Demand

Dimitri Frolowsckii
Sep 21, 2021
Image: Micheile Henderson via Unsplash

Fitch Group, a leading financial information services provider, announced the launch of Sustainable Fitch targeting fixed-income investment products by offering new ESG ratings.

“The ESG Ratings coverage will initially be focused on the ESG-labeled market, but in time will comprise the entire fixed income investable universe,” Fitch said in the release.

The ESG ratings would supply assessments of ESG performance across multiple levels. Initial focus includes green, social, and sustainability-linked bonds as well as performance.

The decision comes after a comprehensive analysis that Fitch Group conducted by collecting feedback from investors and diverse groups of market participants. Representatives of the company believe that the rating will correspond to the market’s needs, given the growing influence of ESG factors and the transition to the green economy.

Lending in environmentally focused projects has been brought front and center in many industries. Petroleum powerhouse bp has embarked on a new strategy to move away from oil production and towards green energy. Lightsource bp announced that it had secured a USD1.8 billion credit and trade finance facility to fuel a strategy of developing 25 GW of solar by 2025. The funding, provided by 10 top-tier global financial institutions, would support the company’s growth and accelerate the deployment of solar across the EMEA, Americas and Asia Pacific regions.

Sectors from energy to metals and mining to retail to agriculture are pursuing sustainability through cleaner, better practices, including cutting carbon. Funds, likewise, are prioritizing these values as they seek investments.

“Investors want transparent, cross-comparable ESG ratings that look beyond labelling or targets to assess ESG fundamentals. Sustainable Fitch will provide investors with best-in-class ESG Ratings, supported by data and analysis backed by the key tenets of consistency, comparability, coverage and granularity,” said Andrew Steel, Managing Director, Global Group Head of Sustainable Finance who will be the head of Sustainable Fitch.

Sustainable Fitch has created in-depth reports and datasets, enabling cross-comparisons across all market levels, including industries, entities and instruments. Therefore, ESG ratings will provide total scores based on a scale from 1 (“Excellent”) to 5 (“Poor”). Additionally, the ranking will be substantiated by subgrades and detailed underlying datasets, which would allow for improved comparative analysis.

Fitch Group also plans to add qualitative commentaries and other significant information that would shed additional light on a company’s alignment with industry standards and taxonomies.

Dimitri Frolowsckii

Dimitri Frolowsckii is a political and energy analyst with over 15 years of experience in journalism.

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