S&P Global Ratings Announces Termination of ESG Numerical Scores in Credit Ratings
S&P Global Ratings recently announced it will stop using alphanumeric ESG scores when assessing credit quality, favoring instead the “analytical narrative paragraphs” as a better representation of an entity’s transparency on ESG-related credit issues. The press release maintained that while the numerical score would be removed, the analytical explanations “will remain integral to our reports.” According to the statement, the change does not impact “ESG principles criteria or our research and commentary on ESG-related topics, including the influence that ESG factors can have on creditworthiness.” Several states have passed legislation or implemented policies restricting the consideration of ESG-factors into investment decisions. Specifically, the State of Florida enacted a law that would prohibit state and local governments from entering into ratings contracts with entities that may propose scores that negatively impact the state’s bond ratings.
Click here to read S&P Global’s press release announcing the ESG credit rating scoring changes.