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Environmental, Social and Governance - Defining Relevance to Credit

Fitch Ratings has launched a new integrated scoring system which shows how environmental, social and governance (ESG) factors impact individual credit rating decisions. We are the only CRA who currently offers this level of granularity or transparency about the impact of ESG on fundamental credit.
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ESG Relevance Scores for Structured Finance & Covered Bonds – The Fitch Approach

October 29, 2019 (Tuesday) or October 30, 2019 (Wednesday)

Please join Fitch Ratings for webinars which will outline Fitch’s recently launched ESG relevance scores for structured finance and covered bonds. 


Register Now

West Coast U.S & Australia Session: Tuesday, Oct 29
EMEA & Asia Session: Wednesday Oct 30
Americas Session: Wednesday Oct 30

Fitch is the First Ratings Agency to Bring ESG Relevance Scores to Structured Finance and Covered Bonds

Our ESG Relevance Scores show the relevance and materiality of ESG to our rating decisions and are integrated into our ABS, CMBS and RMBS transaction reports and covered bonds program research to transparently and consistently display the impact of ESG elements on our credit ratings.

Watch the VideoIntroducing ESG Relevance Scores - Update for Structured Finance and Covered Bonds

Special Report

Introducing ESG Relevance Scores for Structured Finance and Covered Bonds

Fitch Ratings says social and governance risks have the most impact on its new environmental, social and governance relevance scores for structured finance and covered bonds (SF and CvB) ratings globally. Initial results show on aggregate 18% of transactions and programs across SF and CvB asset classes contain contributing ESG factors or credit rating drivers.

Fitch Ratings Launches ESG Heat Map for Public Finance/Infrastructure

Fitch Ratings has launched an ESG 'heat map' for Public Finance/Infrastructure to provide further insight into the relevance of ESG factors to credit ratings. The map is designed to help users understand how relevant individual ESG topics are to credit ratings for different sub-sectors across Global Public Finance, Infrastructure and Project Finance issuers.

Demographic Risks on the Rise for Sovereign Ratings

Demographic trends such as declining or rapidly expanding populations, a bulging youth cohort or pronounced ageing can create risks to sovereign creditworthiness. Key channels of impact include stagnant potential GDP growth, unsustainable pension systems and public debt, and risks to social and political stability.

Introducing our ESG Heat Map

Fitch Ratings has launched an ESG Heat Map, to provide further insight into the relevance of ESG factors to credit ratings. The map is designed to help users understand how relevant individual ESG topics are to credit ratings across different sectors.

Fitch Ratings named 'Most Transparent Ratings Agency' by Environmental Finance

The winners are decided by an independent panel of ten or more institutional investors, reflecting the market's stamp of approval on Fitch's ESG Relevance Scores, launched in January this year to provide robust analysis of the influence of ESG factors on credit ratings.

Heightened Focus on Global ESG Risk for Money Market Funds

ESG investment considerations have become more integrated into money market funds in Europe and the US, with governance considerations having an important influence on the exclusion of potential investable assets. However, MMFs' core investment objectives of liquidity and preservation of capital have resulted in high-quality, low-risk investment profiles already aligned with ESG core investment objectives.

Financial Times: ESG money market funds grow 15% in first half of 2019

Coal Power Pressured Despite Affordable Clean Energy Rule

The US Environmental Protection Agency's new Affordable Clean Energy rule has a limited near-term effect on public power issuers and will not change the long-term pressure on most public power utilities to reduce carbon dioxide (CO2) emissions.

Clear Evidence of Sectoral, Regional ESG Credit Patterns

Fitch Ratings says that its analysis of ESG Relevance Scores shows clear evidence of sectoral and regional patterns for how environmental, social and governance (ESG) factors affect non-financial corporate credit ratings. 

Milken Institute Global Conference 2019 – Portfolio Risks: What Are You Ignoring?

Andrew Steel, Global Head of Sustainable Finance, joins other thought leaders to discuss the hidden risks that investors may not have assessed or priced when considering their portfolios at the 2019 Milken Institute Global Conference.

Introducing ESG Relevance Scores for Public Finance and Infrastructure

ESG factors generally have a low level of direct impact on public finance and infrastructure credit ratings. However, governance is the most influential ESG risk factor across the overall ratings portfolio. This was driven by public finance issuers, which is not surprising given that factors such as political stability, creditor rights, financial transparency, governance structure, government independence and control of corruption are important considerations in our credit rating process. 

Watch the VideoIntroducing ESG Relevance Scores - An Update for Public Finance and Infrastructure

China's Renewable Consumption Target Policy to Boost Volume and Enhance Returns

China's newly announced Renewable Power Consumption Target Policy will help to enhance the sector's volume visibility by specifying a target renewable-power consumption percentage for each province. Meanwhile, grid-parity projects could get additional income from selling green certificates. 

Financial Crime Compliance/Conduct Risk Drive High Financial ESG Scores

Financial crime compliance and conduct issues drive the highest impact Environmental, Social & Governance (ESG) relevance scores for bank credit ratings in developed markets, according to a new report that looks at specific financial institutions that have high ESG relevance scores (i.e. '4's and '5's). 

1Q19 Dashboard

Green Bond Fund Sector Maintains Strong Growth

Fitch Ratings estimates that European green bond fund assets under management reached EUR5.4 billion at end-December 2018, registering 83% growth from 2017. This compares with a 3% contraction in the European bond market overall in the same period. However, these funds remain tiny in the context of the broader fixed income fund market

Introducing ESG Relevance Scores for Sovereigns

Environmental, Social or Governance (ESG) factors impact the credit ratings of all Fitch-rated sovereigns, with governance the most important driver. All sovereigns have achieved the highest ESG Relevance Score of ‘5’ (highly relevant, key rating driver) on “Political Stability and Rights” and “Rule of Law, Institutional & Regulatory Quality and Control of Corruption” within the overall governance category.

Middle East in Ambitious Drive for Renewables Generation

Several governments in the Middle East have set ambitious targets for the development of renewable energy, which will give rise to large capital requirements in the region. The sovereign rating may be a critical factor in our assessment of credit strength of renewable projects due to the government-related entity status of many off-takers or entire projects. 

ESG Risk

Introducing ESG Relevance Scores for Financial Institutions

Nearly 20% of global financial institution ratings are currently influenced by governance risk according to an analysis of new Environmental, Social & Governance (ESG) Relevance Scores. ESG risks overall have a low level of direct impact on financial institution credit ratings. The scores cover over 900 banks, non-bank financial institutions and insurance companies around the globe. Download our ESG Financial Institutions special report to learn more

US Drug Prices Unlikely to Hurt Insurer/Supply Chain Margins

Changes currently being proposed concerning prescription drug rebates and pricing under Medicare/Medicaid are not expected to materially pressure margins or profits over the long term for U.S. health insurers, drug companies, distributors and PBMs (pharmacy benefit managers), Fitch Ratings says. 

What Investors Want to Know

Europe Nuclear Generators Most Exposed to Large One-Off Costs

European power generation companies, particularly nuclear power plants, are more exposed to one-off costs and subsequent negative rating impact from large, unanticipated events than regulated network companies. Insurance covers some risks but is unlikely to provide full-cost coverage in the event of extremely large accidents. 

Special Report

Electric Vehicle Growth Could See Oil Demand Peak By 2030

Electric Vehicle (EV) adoption is an increasing threat to oil demand, which could plausibly peak before 2030. This is not our core scenario, but developments in 2017 show how technological changes and greater product awareness could lead to annual sales of 10 million battery-powered EVs by 2025

What Investors Want to Know: ESG Relevance Scores

Read a special report on Sustainable Finance explaining how Fitch generates ESG Relevance Scores and how investors should interpret them.  

China's Renewable Policy to Favour Grid-Parity Projects

We expect large power companies like State Power Investment Corporation (SPIC; A/Stable), China General Nuclear Power Corporation (CGNPC; A/Stable) and China Three Gorges Corporation (CTG; A+/Stable) to continue pursuing their strategy of an increasing share of renewable assets, which we view as a lower price and volume risk than thermal power.

Webcast on Demand

Utilities’ Carbon Dioxide - Rising Cost Item for European Utilities

Fitch Ratings hosted a live webcast on utility companies’ CO2 cost exposure. The presentation will address the current CO2 pricing environment, the relative exposure of companies and countries in Europe, and the potential credit rating implications for Fitch’s portfolio. Listen on Demand

Governance Most Relevant of ESG Risks for Banks

ESG risks tend to have limited direct effect on bank ratings. However, more broadly, ESG factors influence rating decisions for a larger group of banks. For Fitch-rated global banks, 22% have ESG relevance scores that indicate ESG factors influence the rating ('4' or '5' on the 1-5 scale). 

China's EV Market to Sustain Rapid Growth Despite Subsidy Cuts

The Chinese government's recent sharp cuts to electric vehicle (EV) subsidies are unlikely to disrupt fast volume growth. We expect demand in the world's largest EV market to be supported by increasingly attractive product offerings, as well as wider commercial use of passenger EVs, in addition to a potential "pull-forward" effect in 2Q19.

Fitch Ratings Names Mervyn Tang Head of ESG Research

Based in Hong Kong, Mr. Tang will oversee a newly formed research team which will primarily focus on thematic and cross sector ESG research using both internal and external datasets.

Global Non-Bank Financial ESG Risk Mostly Governance

Governance tends to have a higher relevance for emerging market NBFIs versus developed market NBFIs, where it is often associated with the implementation and/or execution of corporate strategies and structures. Developed market considerations related to governance include complex group structures, key person risk and transparency.

ESG Risks Limited For US Non-Life (Re)insurance Ratings

For US non-life companies, environmental issues can be particularly relevant given a significant number of individual carriers' underwriting exposure to natural catastrophe risk and latent asbestos and environmental losses.


ESG Relevance Scores for Financial Institutions

Our analysts from Insurance, Banks and NBFI, provided a detailed overview of our approach to ESG, our analytical framework, and the deliverables that are available to market participants. Listen on demand now

Enhanced Navigators

See the blend of credit and ESG in our enhanced Navigator reports for available sectors. 

Search Enhanced Navigators

Green Bond Funds: Mixed Climate for European Funds

Assets are up, but performance is down. For European green bond funds, 2018 was a year of achievements and setbacks


Australian and New Zealand ESG Relevance Scores Webinar

Andrew Steel, Global Head of Sustainable Finance, provided a detailed overview of our approach to ESG, our analytical framework and the deliverables that are available to market participants. Aggregate data on our rated corporate portfolio was also discussed during the webinar. Available now on demand


Introducing Fitch Ratings ESG Relevance Scores

The new ESG Relevance Scores transparently and consistently display both the relevance and materiality of ESG elements to the rating decision.



Listen on Demand: ESG Relevance Scores for Global Credits

Andrew Steel, Global Head of Sustainable Finance, provided a detailed overview of our approach to ESG, our analytical framework and the deliverables that are available to market participants. Aggregate data on our rated corporate portfolio was also discussed during the webinar. Listen on demand

Fitch Group Signs UN Principles for Responsible Investment

Fitch Group announced it has signed the United Nations-supported Principles for Responsible Investment (UN PRI), underlining its commitment to incorporating environmental, social and corporate governance (ESG) issues into investment practice and developing a more sustainable global financial system.

ESG Corporate Rating Influence Varies

Environmental, social and governance (ESG) factors influence a significant minority of ratings across all corporate sectors, but are very rarely the direct driver of a rating action, Fitch Ratings says in a new report. Social risks overall have a bigger impact than environmental ones, and natural resources companies are more likely to see pressure from governance than other ESG factors.


Understanding ESG Relevance Scores for Issuers

Learn more about our new ESG Relevance Scores in this two-minute walkthrough from our corporate analytical group. 

Higher Relevance Explained, Name-by-Name

In this introductory primer, we explain sector differences for each ESG risk element and summarise the rationals behind higher ESG scores on over 300 issuers:

Read the Corporate ESG Relevance Primer


Andrew Steel


Andrew Steel

Global Head of Sustainable Finance

+44 203 530 1596

Aymeric Poizot


Aymeric Poizot

Head of Investor Development

+33 1 44 29 92 76

Mervyn Tang


Mervyn Tang

Head of ESG Research

Sustainable Finance

+852 2263 9633

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