Fitch Group launched Sustainable Fitch, which will offer a comprehensive range of ESG Ratings products at both an entity and instrument level for all asset classes globally.
The ESG Ratings coverage will initially be focused on the ESG-labelled market, but in time will comprise the entire fixed-income investable universe. Sustainable Fitch believes it will be able to offer the broadest coverage from a single provider in the ESG information market.
The new ESG Ratings from Sustainable Fitch assess the ESG performance and profile of entities and instruments. They are backed by clear methodologies, with source data derived using the same trusted principles and platforms that underpin Fitch credit ratings. They provide an objective, full assessment of ESG performance at Entity, Instrument and Framework level, allowing for detailed comparability.
The ESG Ratings are both modular and granular, show clearly how they are derived, and are backed by Sustainable Fitch’s dedicated team of ESG analysts. Coverage will not be limited to the Fitch credit ratings universe or the existing universe of green or sustainable-linked bonds.
The creation of Sustainable Fitch builds on the successful 2019 launch of Fitch Ratings ESG Relevance Scores, which show the impact of ESG factors on credit rating decisions and are now maintained on over 10,500 issuers and transactions. Sustainable Fitch’s capabilities will include:
– ESG-integrated credit research and analysis via existing ESG Relevance Scores;
– Climate risk assessment through its existing Climate Vulnerability Scores;
– Pure ESG analysis and reports via the new ESG Ratings; and
– Ongoing sector and thematic ESG research.
“Investors want transparent, cross comparable ESG ratings that look beyond labelling or targets to assess ESG fundamentals,” said Mr. Steel. “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.”Sustainable Fitch will be headed by Andrew Steel, Managing Director, Global Group Head of Sustainable Finance.
“We have spent a lot of time assessing what is currently available in the market, listening to and gathering feedback from investors and other market participants. Our new ESG Ratings product is in direct response to what the market is asking for, as was the case in 2019 when we created our ESG Relevance Scores with investors in mind.”Paul Taylor, CEO, Fitch Group
Sustainable Fitch ESG Ratings are not credit ratings. They are designed to help market participants to evaluate the relative ESG quality of financial instruments and entities. They provide consistency, granularity and transparency via:
– Full coverage of labelled bonds (green, social, sustainable, KPI-linked, transition);
– Instrument and entity level reports and ratings (including framework analysis);
– Ability to cover any debt instrument (bonds and loans, labelled and conventional);
– Fully modular grading system (access to sub-grades for all main indicators); and
– Consistent disclosure of alignment indicators (ICMA, UN Sustainable Development Goals, EU Green Bond Standard, etc.)
Fundamentally, the focus of the ESG Rating analysis is on action, outcome, impact and activity rather than purely on policies and broader commitments.
The ESG Ratings suite assesses all types of debt instruments (bonds and loans), whether they are labelled, plain vanilla, or structured instruments. The suite also covers any type of entity: corporate; leveraged finance; financial institution; sovereign, supranational and agency (SSA); project finance; public finance; and structured finance.
The ESG Ratings suite is composed of three major pillars:
- an ESG Entity Rating (ER1-5);
- an ESG Instrument Rating (IR1-5);
- and for labelled or KPI-linked debt instruments, an additional ESG Framework Rating (FR1-5).
Source: Fitch Ratings