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Sustainable Fitch launches new ESG Ratings service

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Sustainable Fitch has launched its ESG Ratings for global labelled structured bonds and covered bonds.

  • Sustainable Fitch will now offer entity ratings, framework ratings and instrument ratings for covered bonds, and framework and instrument ratings for ABS bonds.
  • It follows the September launch of the ESG Ratings, Data & Analysis service.
  • The company’s expanding portfolio suggests there is increasing interest and demand for ESG-focused financial products.

Sustainable Fitch, part of credit ratings provider Fitch Ratings, will now offer entity ratings, framework ratings and instrument ratings for covered bonds, and framework and instrument ratings for asset-backed security (ABS) bonds. It will provide ratings on labelled structured notes spanning the following sectors: residential mortgage-backed security (RMBS), commercial mortgage-backed security (CMBS), solar ABS, auto ABS, consumer ABS and utilities ABS.

The company said that ESG Ratings, Data & Analysis offers granular and transparent ESG ratings and sub-scores at an entity, framework and instrument level. ESG ratings are provided on an absolute and fully cross-comparable rating scale, with qualitative commentary from ESG analysts, produced via processes that ensure the independence of its ratings.

Entity Ratings evaluate an issuing entity’s positive and negative impact on the environment and society based on both their underlying business activities, overall strategy, targets, policies and procedures, and governance. Framework Ratings evaluate a financial instrument’s impact on the environment and society based on the Use of Proceeds or Key Performance Indicators, where applicable, and the strength and governance of the instrument’s overall framework. Finally, Instrument Ratings integrate the Entity Rating and Framework Rating, providing issuer ESG context to instruments and allowing for absolute comparison of financing instruments across sectors, geographies and labelling frameworks.

Sustainable Fitch’s current dataset of labelled structured bonds is over $100 billion, expanding on the initial set of $500 billion of labelled and KPI-linked instruments issued by North American, UK and European corporates, and financial institutions. Sustainable Fitch intends to achieve full coverage of labelled bonds by early 2023, including public finance, agency and sovereign debt issuances.

The launch comes after ESG Ratings, Data & Analysis was announced in September 2022, covering North American, UK and European corporates, as well as financial institutions.

Mike Simonton, head of Sustainable Fitch, said: “Sustainable Fitch was launched with a goal of both listening to investors and providing products that offer a comprehensive assessment of ESG fundamentals.”

He concluded: “The expansion of Sustainable Fitch’s ESG Ratings to global labelled structured bonds and covered bonds meets a critical market demand. Our ESG data and analysis combined with ESG Ratings provide investors with the necessary tools to evaluate ESG impact, outcome and performance at a detailed individual factor level.”

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