Let’s have ESG ratings as well as credit ratings when issuing bonds

A short post to salute an initiative of Vigeo Eiris (where I am a non-executive director), which I hope will have a big contribution to shifting the finance system by making ESG information the norm in investment decisions.

As part of One Planet Summit – President Macron’s intervention on the second anniversary of concluding the Paris Agreement on climate change – a long list of financial institutions made a declaration inviting issuers of financial instruments to provide an Environmental, Social and Governance (ESG) rating alongside their credit rating (the text is below, or you can see the original here).

Why does this matter? Because its part of bringing sustainability into the day-to-day decisions of mainstream financial institutions. It puts ESG information on the same footing as credit rating. People will be more likely to use it when deciding if to buy an instrument, and at what price.

My own experience is that people in mainstream financial institutions have been stuck. They don’t know what they don’t know. There’s been a deadening feedback loop. ESG information has not proved useful, so they don’t use it. Because it is not used, there’s no proof that it is useful. Repeat.

Now, there have been steps forward in some leading institutions. London Business School Associate Professor Ioannis Ioannou has research that shows ESG data is increasingly being used in investment decisions in ways that reward high performers (see this video).

The declaration is an effort at a step-change. Currently whenever a company issues a bond they automatically commission a third-party to privode a credit rating, in effect a judgement about whether the company will repay. Investors use that decide whether to hand over their money, and at what price.

If companies also commissioned an ESG rating then investors could use that information in their decisions. By making the ESG information automatically available it cuts the deadening feedback loop. Intread there is a chance of positive feedback: ESG information does prove useful, which means the norm is to use it.

There is some evidence that a better ESG rating seems to lead to a lower price. This provides a fundamental ‘business case’: do well at sustainability to get cheaper loans that you can use to invest in the business for future success.

Now, Vigeo Eiris is a global independent provider of ESG research and services for investors, public and private organisations and NGOs. So, of course, it is in their interest to have more companies wanting ESG ratings. But there are other ESG agencies. Let the best one win.

Besides, profiting by delivering on a social need is what sustainable business is all about.

Personally, I’m proud to be part of an organisation which is trying to shift finance. This also holds true for EIRIS Foundation, where I am a Trustee. The Foundation helps responsible investors to make a difference, partly through its holding in Vigeo Eiris. There’s lots to do in that domain, and putting ESG ratings on the same footing as credit rating is only one part. But that’s the part Vigeo Eiris can push right now.



We, investors, asset managers, insurers, from the private, public and mutual sectors, and market infrastructures, signatories of this declaration, invite issuers to a communication of their ESG rating (Environment, Social and Governance), as and in addition to their financial rating.

  • Because we are convinced that social, environmental, ethical and governance factors constitute real areas of risk that have an influence on the quality of credit and the intrinsic value of companies, and that they are drivers for future value creation;
  • Because our responsibility is, in particular, to direct public and private savings towards sustainable, inclusive, less carbon-intensive growth and meeting the challenge of climate change, while preserving capital and seeking returns that are consistent with this objective;
  • Because, in particular, large institutional investors with very long-term commitments express the need to analyse the sustainability of the business models of the companies, or projects, in which they plan to invest;
  • Because the integration of these factors in savings and life insurance products, reinforced by labels, such as the SRI label, contributes to the renewal of savers’ confidence in finance.

In this respect, the collection, processing and qualification of information by specialised agencies helps to inform investors in their autonomous investment or project financing decision. They allow them to appreciate the extent to which issuers integrate social, environmental, and governance issues into their strategies and operations, and mitigate their risks. This information contributes to the smooth functioning of the markets, the optimal allocation of capital and the reduction of information asymmetry.

The viability of these agencies requires a change in their current economic model, possibly through issuers’ payment of their ratings. The latter would then solicit the supplier(s) of their choice during their financing operations: bond issuances, project financing, IPO… The agencies should therefore have to provide them with guarantees of independence, methodological transparency, greater proximity, and responsiveness towards them.

Observing that more and more companies are measuring the value of independent assessment of their commitment to sustainable development in terms of attractiveness, reputation and potential value creation, we support the opening of an in-depth dialogue between the parties concerned.

We are thus contributing to Europe’s ambition to promote sustainable and responsible finance, which is reflected in particular in the work of the High-Level Experts Group on Sustainable Finance under the auspices of the European Commission. In this respect, our initiative is a first step towards a dialogue with issuers and investors at European level.

We also intend to contribute, through this initiative, to the consolidation of independent European and global players in the international market for extra-financial analysis.


-Aviva France
-Group Aesio
-AG2R La Mondiale
-BNP Paribas Asset Management
-Candriam Investor Group
-Caisse des Dépôts et Consignations
-CM CIC Asset Management
-CNP Assurances
-Deutsche Asset Management
-Établissement de Retraite Additionelle de la Fonction Publique
-La Banque Postale Asset Management
-Fonds de Reserve pour Retraites
-MGEN Group
-Groupama Asset Management
-Harmonie Mutuelle
-OFI Asset Management.

With the backing of:
-Paris Europlace
-Association Française des Investisseurs Institutionnels
-Association Française de Gestion Financière
-Fédération Française de l’Assurance
-Fédération Nationale de la Mutualité Française


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