Credit ratings, commentary and research provider Fitch Ratings announced today the launch of the ESG Sector Discovery Tool for Corporates, aiming to provide companies with a top-down view of the credit relevance and materiality of ESG issues across all corporate sectors.
Materiality, or determining the importance of a piece of information, is a key issue in ESG for investors and issuers, and can often be a key point of misunderstanding. Investors exploring the sustainability aspects of an investment or portfolio will come across many factors and that can impact their subjects’ ESG standing, yet determining the relative significance of each factor can be very difficult. Materiality assessments become even more challenging when considering factors across multiple industries, where different issues can have varying levels of relevance.
Fitch Ratings said:
“The premise behind the ESG Sector Discovery Tools and accompanying ESG in Credit reports is to support more transparency around the financial relevance and materiality of ESG factors. With the range of definitions for ESG materiality and approaches to responsible investment, it is not clear how ESG issues are being valued and integrated into investment analysis and decisions by investors and analysts. By releasing these tools and reports weekly over the next couple of months, we hope to contribute to more clarity around this important issue and provide investors with a tool that can help with their research and analysis of ESG factors.”
Fitch is launching the new first materiality assessment tool covering non-financial corporates, and intends to follow up with Discovery Tools for Structured Finance, Financial Institutions, and Public Finance and Infrastructure.
Justin Sloggett, Director, Sustainable Finance at Fitch Ratings, said:
“To assist investors and issuers with their ESG integration efforts, we have launched our new ESG Sector Discovery Tool that clearly displays which ESG factors are relevant or material to our credit rating decisions and allows comparisons between sub-sectors of non-financial corporates. We are cognisant that investors are struggling to understand how other financial players define ESG materiality. We hope that this tool and subsequent Discovery Tools and guidance reports will help them.”