Bloomberg: ESG Is Increasingly Important in Credit Ratings, Moody’s Says

14 April 2020

Moody’s is paying more attention to environmental and social issues when assessing companies’ risk as the financial impact becomes clearer. Climate and demographic change, as well as societal issues like income inequality, are increasingly highlighted, Moody’s analysts led by Robard Williams

“We expect ESG considerations to be of growing importance in our assessment of issuer credit quality,” the Moody’s analysts wrote. “While our ratings have always reflected our views of ESG risks, the materiality of key environmental and social issues continues to increase.”

Moody’s cited ESG risks as material credit considerations in 33% of the 7,637 private-sector rating actions published in 2019. This underscores “the significance of these considerations in our credit analysis,” Moody’s said.

Financial strategy and risk management -- a governance risk category -- was cited in the largest share of rating actions. Climate risk, including transition to a low-carbon economy as well as the adverse effects of physical climate change, is “taking on greater prominence in discussions of credit quality,” Moody’s said.

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