Published on 12 Feb 2019.
RAM Ratings observes that the consideration of Environment, Social and Governance (ESG) risks is gaining traction within the USD100 tril global bond market. This is evident from the surge in assets under management, from USD15.9 tril (2016) to USD29 tril (2019), held by investors that are signatories to the United Nations-supported Principles for Responsible Investment’s (PRI) Statement on ESG in Credit Ratings (PRI ESG Statement).
Through this initiative, the PRI aims to better align investors and credit rating agencies (CRAs) on the importance of ESG issues. On 26 May 2016, RAM Ratings joined the global line-up of six pioneer CRA signatories to the PRI ESG Statement. Today, the PRI ESG Statement is supported by 147 investors and 18 CRAs.
In line with its commitments under the PRI ESG Statement, RAM published its Primer on ESG in Credit Ratings on 1 September 2016. RAM has been a strong voice in global ESG thought leadership through our involvement in international forums and published views. On 3 July 2018, RAM’s efforts culminated in the publication of two papers - RAM’s Criteria & Methodology: Integrating Environmental, Social and Governance Considerations into Credit Ratings and Standpoint Commentary: Championing PRI’s ESG in Credit Ratings. “Since July 2018, our views and analysis of ESG factors have been integrated into the relevant sections of our credit rating rationales,” highlights Foo Su Yin, CEO of RAM Ratings.
The PRI has been working with investors and CRAs since the launch of the PRI ESG Statement in 2016. This collaboration seeks to promote market understanding of practices, identify gaps in the consideration of ESG factors in credit risk analysis, and find ways to address such gaps. The PRI - through its Advisory Committee on Credit Ratings, of which RAM is a member - has published the three-part Shifting perceptions: ESG, credit risk and ratings series of seminal reports. Part 1: The state of play was published on 4 July 2017, followed by Part 2: Exploring the disconnects on 12 June 2018, and Part 3: From disconnects to action areas on 30 January 2019. These three PRI publications are available at www.unpri.org/credit-ratings. “The PRI initiative has been an important catalyst to stimulate visible change by CRAs”, says Carmen Nuzzo, Senior Consultant, Credit Ratings Initiative. “We look forward to continue the collaboration and to the work ahead with RAM Ratings, which has been a leading active contributor”, added Carmen.
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