What is Priced by the Bond Market and Credit Rating Agencies?
By
👤Amundi
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ESG and Sovereign Risk
As recently as 10 years ago, ESG was considered a niche investment market reserved for the particularly conscientious investor. Fast-forwarding to today, ESG considerations have been placed firmly at the heart of the finance industry. Consumer awareness has risen with increasing attention paid not only to our individual carbon footprint, but also how it impacts upon society as a whole. Meanwhile international organisations have joined the call for legislation and in turn, policymakers and regulators have developed new rules. On the other side, asset managers, asset owners and investors have invested massively in ESG strategies.
One, oft ignored, aspect underpins this development; the emergence of extra-financial analysis. Whilst financial analysis relies on financial ratios, extra-financial analysis is dedicated to environmental, social and governance issues. This has meant that alternative data had to be developed to analyse issuers from a different angle. It is not uncommon to receive extra-financial ratings or information from ESG rating agencies that are completely at odds with the view provided by the credit rating agencies. The conflict between extrafinancial and financial analysis or ESG and credit ratings remains complex:
By
👤Amundi
