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CRISIL Ratings to call out ESG impact on credit profiles

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MUMBAI, India, Jan. 14, 2022 /PRNewswire/ — CRISIL Ratings will start disclosing the impact of environmental, social and governance (ESG) parameters separately when assigning credit ratings, taking cognisance of their increasing importance in investment decisions and when accessing capital world over.

The past couple of years have seen ESG-led investments gain traction. ESG assets stood at $37.8 trillion as of March 2021, and accounted for around a third of global assets under management (AUM). India has also caught on to the trend, with the AUM of ESG-focused funds totting up to more than Rs 12,000 crore as of December 2021.

Says Gurpreet Chhatwal, Managing Director, CRISIL Ratings, “ESG-readiness is becoming an important distinguishing feature for corporates to access funds from the capital market. Given this, and the improving disclosures on ESG parameters, we will assess — and make known — their impact separately when assigning credit ratings.”

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The assessment will be based on a proprietary framework that weighs sectoral impact on environment and social factors, and the relative performance of a company on ESG aspects1

To be sure, ESG factors impacting fundamental business sustainability have always been a part of the credit assessments done by CRISIL Ratings — under different parameters.  For instance, estimation of governance-related risks is the cornerstone of our credit-rating methodology. Further, investments towards reduction in emission intensity, deployment of efficient methods of effluent treatment, strong supply chain and labour management that translate into long-term sustainable and efficient operations are also considered. CRISIL Ratings will continue to factor these in rating assessments as applicable.

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Additionally, with investors beginning to screen opportunities through the ESG lens, sustainability parameters can have a bearing on the cost and availability of funds for corporates. Such corporates generally access the capital markets — both equity and debt — and/or rely on foreign investors to meet their funding needs.

CRISIL Ratings will, therefore, assess and disclose the impact of the ESG aspects on the credit risk profiles of companies, which will underscore their ability to raise funds and, in turn, financial flexibility. This, however, is predicated on the availability of ESG information.

Improving disclosures of non-financial data is crucial to broader espousal of ESG and early steps towards this have already been taken by the Securities and Exchange Board of India (SEBI), which has introduced Business Responsibility and Sustainability Reporting (BRSR). As a part of BRSR, the top 1,000 listed companies will now have to mandatorily disclose non-financial information from next fiscal and voluntarily this fiscal.

Says Rama Patel, Director, CRISIL Ratings, “We will call out the impact of ESG on credit ratings for listed corporates that publish their ESG data, and lean on the capital markets and foreign investors for funding requirements. Over the medium-term, as ESG disclosures improve and get integrated more and more into investment and lending decisions, CRISIL Ratings will expand its scope to assess and disclose ESG impact on more companies.”

For further information contact:

Media relations

Analytical contacts

Customer service helpdesk

Pankaj Rawat

Media Relations

CRISIL Limited

M: +91 99 872 61199

B: +91 22 3342 3000

pankaj.rawat@crisil.com

 

Naireen Ahmed

Media Relations

CRISIL Limited

D: +91 22 3342 1818

M: +91 90 040 84769

B: +91 22 3342 3000

naireen.ahmed@crisil.com

 

Somasekhar Vemuri

Senior Director and Head

CRISIL Ratings Limited

D: +91 22 3342 3106

somasekhar.vemuri@crisil.com 

 

 

Rama Patel

Director

CRISIL Ratings Limited

D: +91 22 4254 1919

rama.patel@crisil.com

Timings: 10.00 am to 7.00 pm

Toll free Number:1800 267 1301

 

For a copy of Rationales / Rating Reports:CRISILratingdesk@crisil.com 

 

For Analytical queries:ratingsinvestordesk@crisil.com

 

About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/ partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).

CRISIL Ratings Limited (‘CRISIL Ratings’) is a wholly owned subsidiary of CRISIL Limited (‘CRISIL’). CRISIL Ratings is registered in India as a credit rating agency with the Securities and Exchange Board of India (‘SEBI’).

For more information, visit www.crisilratings.com  

About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India’s leading ratings agency. We are also the foremost provider of high-end research to the world’s largest banks and leading corporations.

CRISIL is majority owned by S&P Global, Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com 

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CRISIL Ratings has taken due care and caution in preparing this Press Release. Information has been obtained by CRISIL Ratings from sources that it considers reliable. However, CRISIL Ratings does not guarantee the accuracy, adequacy or completeness of information on which this press release is based and is not responsible for any errors or omissions or for the results obtained from the use of this press release. CRISIL Ratings especially states that it has no financial liability whatsoever to the subscribers/users/transmitters/distributors of this Press Release. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the press release pertains.

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1 Refer to the below relevant criteria documents for further details:

–  Rating criteria for manufacturing and service sector companies 

–  Rating criteria for finance companies 

–  Rating criteria for banks and financial institutions 

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