Moody’s has published a report looking at the impact of ESG factors on asset manager’s ratings.
Among their key findings are:
ESG risks are captured in Moody’s credit analysis. They consider ESG factors in their analysis of asset managers’ creditworthiness, even when they are not explicitly captured by Moody’s ratings methodology, or cannot be quantified.
Exposure to ESG risks varies by region. Asset managers’ ESG exposures and their focus on managing ESG risk varies by region, reflecting regulatory and social differences. The risk of mis-selling or misconduct litigation is greater in developed countries, which typically have stricter consumer protection laws.
The rise of ESG risks creates threats and opportunities. ESG risks have become more significant due to evolving regulations, climate change and demographic trends, and changing consumer and investor expectations. This creates opportunities for asset managers that apply strong ESG criteria to their investments to stand out.
Sustainable finance is shaping asset managers’ processes and products. In many parts of the world, asset managers are under growing pressure from policymakers, regulators and investors to prioritize the allocation of capital towards the development of a sustainable economy.