ESG Data Guide 2023

Fitch Solutions - ESG Relevance Scores

Data category

  • Environmental data
  • Governance data
  • Research data
  • Social data
  • ESG impact on Credit Ratings

The data offers solutions for:

  • Investment decisions and portfolio insight
  • ESG impact on Credit Ratings

Who are the data users?

  • Corporates
  • Financial institutions
  • Investors

Brief description of the data offering

ESG Relevance Scores are intended to augment market transparency and satisfy investor demand for more thorough and robust reporting on how ESG affects credit risk. While investors can access many and varied data sources when seeking to manage portfolios integrating ESG considerations, few solutions specifically highlight entity- and sector-level ESG issues as elements for fundamental credit risk. This approach represents a significant step forward in providing transparency around the treatment of ESG factors from a credit risk perspective when making rating decisions.

ESG Relevance Scores are observational as they look at how much an ESG element affects a rating. The scores provide granularity on why ratings change and make the impact of ESG risk issues on a rating decision under Fitch Rating’s existing criteria transparent and easy to understand. ESG Relevance Scores do not make value judgments on whether an entity engages in "good" or "bad" practices from an ESG perspective, nor do they assess how broadly sustainable a practice is, but rather they draw out which E, S and G risk elements are influencing the credit rating decision.

While scores and rationale are available as part of standard Fitch credit research, underlying data is also available as a feed, which provides investors with an automated and comprehensive way to examine, discuss, and challenge opinions about how ESG factors impact individual rating decisions. Investors also benefit from Fitch Ratings long track record of analysing issuers and its broad market coverage with 80%+ of the debt in global fixed-income indexes carrying a Fitch Rating.

Where and how do you source your data?

ESG Relevance Scores are assigned by Fitch Ratings analysts during their standard credit rating process. To assign ESG Relevance Scores, Fitch Ratings analysts use a holistic set of ESG risk issue categories informed by external classifications such as the SASB to create sector-specific frameworks. Sector templates provide the rating agency’s view of specific credit issues related to the sector for each of the general issue categories. Indicators frequently used to gauge sustainability or “ESG performance” can align with credit risk, but not always. The relevance to a credit rating will also depend on the broader credit profile, including the ability of the entity to absorb or pass on higher costs, or its reliance on particular funding sources.

Environmental and Social risks can materialize in credit factors, depending on the risk and sector-specific nuances. ESG risks can affect credit profiles both on an entity-specific and sector-wide basis and be considered in credit analysis. While Governance risks are typically assessed directly in Fitch Ratings credit rating criteria, they can also affect other areas such as profitability and financing flexibility. In contrast, environmental and social risks are generally assessed in reference to other credit factors.

What is the cost for your data offering?

Dependent on client size, use case and other factors.

Contacts

john.diebold@sustainablefitch.com

Guide entries by Fitch Solutions