Candriam is one of the signatories of the ESG Credit Ratings Statement launched last year by the United Nations Principles for Responsible Investment (PRI). The statement has now been signed by over 100 investors accounting for US$19 trillion AuM and 8 credit ratings agencies (CRAs). Paving the way for dedicated forums coming over the next year, PRI just published a first report in a three part series.
The idea of the ESG Credit Ratings Statement is to develop a better understanding of ESG issues as they relate to creditworthiness and to craft practical solutions for a more systematic and transparent incorporation of ESG in credit ratings and analysis. The transparency on which ESG factors are considered, the way in which they are integrated, and the extent to which they are deemed material in credit assessments will enable better alignment of key stakeholders.
By signing it, Candriam, as a fixed income investor, commits not only to incorporate ESG factors into its investment analysis and decision-making processes, but also to seek appropriate disclosure on ESG issues by investee entities and credit rating agencies.
While the recently published report insists on the existing work and efforts to consider ESG factors in credit risk analysis at both investors and credit agencies’ sides, it also stress some discrepancies in terms of expectations: mutual transparency on how existing processes already integrate ESG risks, better assessment of their materiality appear as the main challenges.
In line with our commitment, Candriam SRI teams and Fixed Income department will work together in the coming months to discuss the outcomes of this report and determine the best way to engage with CRAs : for a better understanding of their approach to ESG risks and also to discuss the best way to combine their ESG default-only view with our often longer-term approach to ESG risks. This work will also feed our contribution to the next steps of this initiative.