New Moody’s scores to reflect ESG risks

8th June 2021 By: Marleny Arnoldi - Creamer Media Online Writer

Ratings agency Moody’s has published environmental, social and governance (ESG) issuer profile and credit impact scores for various rated issuers in the global metals and mining sector.

This follows on the agency’s publication of ESG scores for a range of corporate issuers, utilities and US governments earlier this month and for sovereign issuers in January.

Moody’s is integrating more ESG in its credit analysis, which provides greater clarity, consistency and differentiation on risk exposure and the degree of credit impact.

“Nearly all metals and mining companies, including coal companies, have exposure to environmental considerations that carry very high credit risks.

“Social risks are also significant in these sectors, driven by health and safety issues and responsible production risks, with some differentiation by commodity and location of operations,” says Moody’s VP and senior credit officer Benjamin Nelson.

Carbon transition is the biggest environmental risk for thermal coal companies, especially in the US, which is driven by growing global demand and policy support for less carbon-intensive and cleaner energy.

The agency believes that metals and mining companies face the most risk from their dependence on natural capital and the physical damage that mining can cause.

A company's ability to mitigate these various ESG considerations and their significance relative to other credit drivers determines the degree to which the considerations affect its credit rating.

Strong governance is an important mitigant for many highly rated companies in the metals and mining and coal sectors, says Moody’s.

Moody's ESG issuer profile scores are opinions of an issuer's exposure to ESG considerations that could be material to credit risk.

ESG credit impact scores communicate the impact those ESG considerations have on an issuer's credit rating.

Both scores use a five-point scale - one is positive, two neutral to low, three moderately negative, four highly negative and five very highly negative.