Sustainable Rating Agencies

This chapter aims to introduce the sustainable rating marketplace to the reader. In doing so, a foundation is developed so that the actual mechanisms of the agencies can be analysed and assessed against the larger ESG-focused backdrop currently developing within the broader financial system. With there being a marked change towards the incorporation of ESG-related information within financial decision-making, and also with regulatory policies aimed at increasing ESG-related disclosure practices, the methodological footing of the sustainable rating agencies is incredibly important to understand. To accentuate this analysis, the development of the sustainable rating marketplace will also be analysed, mainly on account of a number of recent developments which hint at both the increased importance of the sector, but also the potential of a sector-defining revolution taking place at the moment. Whilst the focus of the chapter will be on the ‘sustainable rating agencies’, it is not prudent to review the sector without including an analysis of the leading credit rating agencies, who are making a massive and concerted movement into this marketplace via a number of M&A deals and alterations to their business focus; the chapter will undertake that analysis also.