Moody's Corporation · NYSE:MCO
Moody's — ESG Presentation (March 2022)
17 slides from Moody's's sustainability presentation, March 2022
Slide 1: ESG Scores Explained: Quantifying the degree of credit impact
ESG Scores Explained: Quantifying the degree of credit impact Rahul Ghosh – MD, ESG Research & Outreach Lucia Lopez – VP SCO, ESG Analytics and Integration March 2022 Ram Sri – AVP, ESG Analytics and Integration
Slide 2: Speakers
Speakers Rahul Ghosh Lucia Lopez Ram Sri MD – ESG Outreach & Research VP – Senior Credit Officer AVP, ESG Analytics and Moody’s Investors Service Moody’s Investors Service Integration Moderator Moody’s Investors Service ESG Scores Explained: Quantifying the degree of credit impact 2
Slide 3: Four Components to MIS Integration of ESG
Four Components to MIS Integration of ESG New ESG scores will assist in transparently and systematically demonstrating the impact of ESG on credit ratings Credit Ratings & Research ESG Classification How is ESG integrated into credit What is ESG? ratings? Our classification reports describe how we d
Slide 4: ESG Classification System Incorporates Credit Relevant Considerations
ESG Classification System Incorporates Credit Relevant Considerations Categories which are the most material to credit Environmental Social Governance Private sector Public sector Private sector Public sector Access to Financial strategy & risk Physical climate risks Customer relations Institutional
Slide 5: Moody's Environmental Risk Heat Map
Moody’s Environmental Risk Heat Map 15 sectors have high or very high environmental risks overall 89 Global industry sectors assessed $79 5 KEY Very High Risk High Risk Moderate Risk Low Risk Trillion of US dollars in rated debt Subcategories of social risks Overall Environmental Overall Environment
Slide 6: Moody's Social Risk Heat Map
Moody’s Social Risk Heat Map 21 sectors have high or very high social risks overall 85 $79 11 Very High Risk High Risk Moderate Risk Low Risk Global industry sectors assessed Trillion of US dollars in rated debt Subcategories of social risks Access PRIVATE Customer Human Health Responsible Demograph
Slide 7: ESG Integration into Credit Analysis
ESG Integration into Credit Analysis Our rating analysis considers all material credit considerations, including ESG • • • • • • • • • • • • • • • The ESG credit impact score (CIS) is an output of the rating process that more transparently communicates the impact of ESG considerations on the credit
Slide 8: Issuer Profile Score Framework – Private Issuers
Issuer Profile Score Framework – Private Issuers The E, S and G profile scores assess an entity’s exposure to the categories of risk in the MIS ESG classification * Category scores incorporate mitigants specifically related to that risk category ESG Scores Explained: Quantifying the degree of credit
Slide 9: What the Moody's ESG scores are, and are not?
What the Moody’s ESG scores are, and are not? The Issuer Profile Scores incorporate: The Issuer Profile Score is not an opinion about: A credit perspective A company’s sustainability performance The impact of sustainability practices on Analysis of ESG issues material to credit risk stakeholders Emp
Slide 10: What the Moody's ESG scores are, and are not?
What the Moody’s ESG scores are, and are not? The Credit Impact Score: The Credit Impact Score: Reflects the impact of ESG on the credit rating Is not the combination of the E,S and G IPS scores Does not have a systematic relationship to the credit Indicates the extent to which the credit rating wou
Slide 11: All Issuers Scored as of Jan 21, 2022
All Issuers Scored as of Jan 21, 2022 » IPS and CIS scores for 1709 issuers so far » 20% have CIS 1,4 or 5 – meaning their ratings are different than they would otherwise be in the absence of ESG issues » CIS 1 shows that ESG considerations can also lead to a positive credit impact. Currently highly
Slide 12: Metals and Mining IPS and CIS Scores indicate negative impact of ESG
Metals and Mining IPS and CIS Scores indicate negative impact of ESG » ESG factors commonly have a moderately negative overall impact on Metals and Mining credit quality » Environmental risk is most often very high, high at best » Social risk tends to be high or very high » Governance is a G-2 or G-
Slide 13: Sovereign IPS and CIS Scores indicate largely credit-negative impact of ESG
Sovereign IPS and CIS Scores indicate largely credit-negative impact of ESG Credit Impact Score (CIS) » ESG factors commonly have a negative overall impact on sovereign credit quality » Environmental risk is most often moderately negative, neutral at best » Social risk tends to be moderately or high
Slide 14: Example: Vale S.A.'s "Highly Negative" CIS in Credit Opinion
Example: Vale S.A.’s “Highly Negative” CIS in Credit Opinion » CIS-4. (highly negative). Vale’s ESG Credit Impact Score reflects a series of ESG concerns » Environmental: E-5 (very highly negative). Vale has a very highly negative exposure to raised after the dam collapse in Brumadinho in January 20
Slide 15: Reference Documents/Reports
Reference Documents/Reports » General Principles for Assessing Environmental, Social and Governance Risks Methodology » (E) Environmental – Environmental Classification – Environmental Risk Heatmap » (S) Social – Social Risk Classification (Private Sectors) – Social Risk Classification (Public Secto
Slide 16: moodys.com
Rahul Ghosh Lucia Lopez Ram Sri Rahul.Ghosh@moodys.com Lucia.Lopez @moodys.com Ram.Sri@moodys.com +44 207 772 1059 + 44 207 772 8750 + 44 207 772 5492 moodys.com
Slide 17: ESG Scores Explained: Quantifying the degree of credit impact
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. © 2022 Moody’s Corporation, Moody’s Inves