Credit ratings agency S&P Global Ratings announced that it will no longer include its ESG credit indicators, aimed at summarizing for investors the relevance of ESG factors on its credit analysis, in its reports on rated entities.
S&P introduced the alphanumeric ESG credit indicators in September 2021, outlining the influence of various ESG-related factors such as climate risk or transparency on its credit rating analysis on a 1 (positive)-to-5 (strongly negative) scale. At the time, S&P said that the indicators will not affect their credit ratings, but were instead meant to supplement the qualitative insights on the impact of the ESG factors on creditworthiness in its credit ratings reports.
In its statement announcing the change, S&P stated that it has “determined that the dedicated analytical narrative paragraphs in our credit rating reports are most effective at providing detail and transparency on ESG credit factors material to our rating analysis,” adding that these “remain integral to our reports.”
Last year, S&P Global was subject to an investigation by Republican attorneys general in several U.S. states, launched by Missouri Attorney General Eric Schmitt and forming part of a broader anti-ESG campaign, alleging that the company’s ESG evaluations, including its ESG credit indicators, were politicizing financial analysis.
ESG ratings providers have also come under scrutiny over the past several months by regulators globally over the transparency and consistency of their ratings. In June, for example, the EU Commission unveiled a proposal for ESG ratings providers to be supervised by European markets regulator ESMA, to ensure quality and reliability, and last month the UK’s FCA announced the launch of a draft voluntary Code of Conduct for ESG ratings and data providers.
Despite the removal of its ESG credit indicators, S&P said that the move will not affect its ESG principles criteria, or its commentary on ESG-related topics, including on the influence of ESG factors on creditworthiness.