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Research Announcement:

Moody's - ESG risks material in 33% of Moody’s 2019 private-sector issuer rating actions

14 April 2020

New York, April 14, 2020 --

  • ESG risks were a material credit consideration in 33% of Moody's Investors Service's rating actions for private-sector issuers in 2019
  • Governance considerations were the most frequently cited ESG issue

Environmental, social and governance (ESG) risks were a material credit consideration in 33% of Moody's Investors Service's 7,637 rating actions for private-sector issuers in 2019, highlighting the importance of ESG in our rating analysis.

Of the roughly 2,500 rating actions that cited ESG considerations, 88% mentioned governance issues, 20% referred to social issues and 16% cited environmental issues, with many containing references to more than one ESG consideration, Moody's said in a report published today.

"Governance considerations are most frequently cited, highlighting the importance and pervasiveness of governance as a rating consideration across sectors globally," said Robard Williams, Senior Vice President at Moody's. "The ESG issues cited in our 2019 rating actions spanned all of the key categories of environmental, social and governance risk as defined by Moody's."

While rating actions citing ESG factors were widely distributed across sectors, the level of exposure to specific environmental, social and governance issues did vary by sector and issuer. For example, among the sectors with the highest proportion of rating actions citing environmental considerations were those Moody's previously identified as facing elevated environmental risk in its published environmental heat map report, including auto manufacturers, coal mining and coal terminals, and unregulated utilities and power companies.

"ESG issues are likely to be of growing importance in our assessment of credit quality, driven by factors such as stricter environmental regulations, and heightened public awareness of issues such as climate change, sustainability and diversity," said Swami Venkataraman, Senior Vice President at Moody's.

About 19% of rating actions citing ESG factors were negative and about 12% were positive, with the remaining 69% neutral. However there was a material difference in the distribution of negative rating actions across the three ESG issues. Where social considerations were cited, a larger percentage of such citations were related to negative rating actions (27%) compared to governance (18%) or environmental issues (20%).

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Swami Venkataraman, CFA
Senior Vice President/Manager
Environmental, Social & Governance
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Robard Williams
Senior Vice President/CSR
CSS
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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