S&P halts ESG credit indicators, sparking mixed reactions among investors

S&P Global Ratings’ recent move to discontinue its issuance of environmental, social, and governance (ESG) credit indicators as part of its ratings analyses has stirred a range of responses. The decision, announced on August 4, has triggered varied reactions from asset managers, Republican politicians, and industry experts. 

The announcement revealed that S&P Global would cease publishing alphanumeric ESG credit indicators for publicly rated entities, reversing a trend that began in 2021 when S&P began issuing ESG scores for public companies. 

The decision has drawn differing viewpoints from professionals within the investment community. Elizabeth Levy, Head of ESG Strategy and Portfolio Manager at Trillium Asset Management, expressed skepticism about the decision’s impact on investor sentiment. She emphasized that ESG considerations go beyond quantitative metrics and involve qualitative aspects that cannot be fully captured by a formula. 

Eric Borremans, Head of ESG at Pictet Asset Management, highlighted that S&P’s move does not impact his firm significantly due to their limited reliance on ESG ratings. Pictet has been cautious about averaging ESG risks and opportunities into a single numeric value, and Borremans noted that regulatory scrutiny on ESG ratings is expected to increase.  

While some experts find S&P’s decision puzzling given their investment in ESG services and thought leadership, others interpret it as a sign of the company’s focus on its traditional strengths, such as assessing credit quality. 

Despite the varied responses, S&P’s decision has been applauded by certain Republican lawmakers who have criticized “woke investing.” They see it as a move away from ESG influencing investment decisions. 

Looking ahead, industry observers are pondering the competitive implications of S&P’s decision on other ratings agencies. While it remains to be seen how this shift will impact the ESG landscape, the decision has ignited discussions about the significance of ESG metrics in evaluating financial risk and return. 

Read more: https://www.pionline.com/esg/sps-decision-drop-esg-ratings-garners-mixed-reactions-industry