Moody’s flags ESG concerns in emerging market debt

Rating agency Moody’s has warned of the heightened ESG risk among issuers of debt in emerging markets (EMs).

More than a third of its rating actions (36%) on emerging market debt issuers were connected to ESG failings, according to a recently published report and primary among these failings were governance considerations.

In addition, ESG considerations are more prevalent in rating actions for public-sector debt issuers in EMs than for their peers in developed markets, reflecting generally weaker fiscal, financial and institutional characteristics, states the report.

The difference is especially clear when comparing factors such as challenges to sustainable development and vulnerability and readiness for physical environmental risk.

While ESG risks are often higher in EMs as opposed to developed markets, the problem is exacerbated by the fact that issuers’ capacity to respond to these risks is often also weaker, according to Nishad Majmudar, Moody’s assistant vice president and analyst.

The coronavirus pandemic, which Moody’s considers a social risk, has also brought to the fore the materiality of key social and governance issues globally and has been factored into many rating actions in 2020. It is also likely to fuel further focus on ESG risks in 2021 and beyond.

“We expect ESG considerations to become even more material to debt issuers’ credit quality globally – and particular in EMs – given the range and rise of ESG risks such as climate change and public health,” added Majmudar.

© 2020 funds europe

HAVE YOU READ?

THOUGHT LEADERSHIP

The tension between urgency and inaction will continue to influence sustainability discussions in 2024, as reflected in the trends report from S&P Global.
FIND OUT MORE
This white paper outlines key challenges impeding the growth of private markets and explores how technological innovation can provide solutions to unlock access to private market funds for a growing…
DOWNLOAD NOW

CLOUD DATA PLATFORMS

Luxembourg is one of the world’s premiere centres for cross-border distribution of investment funds. Read our special regional coverage, coinciding with the annual ALFI European Asset Management Conference.
READ MORE

PRIVATE MARKETS FUND ADMIN REPORT

Private_Markets_Fund_Admin_Report

LATEST PODCAST