Moody's Ratings publishes issuer profiles and credit impact scores for nearly 12,000 entities globally, incorporating climate and environmental, social and governance (ESG) considerations transparently and systematically into the credit analysis.

Its cross-sector methodology for assigning an entity with an ESG score is publicly available to show the impact of ESG considerations on credit risk.

In addition, Moody's Issuer Profile Scores (IPS) indicate an issuer's ESG credit risk exposures, while its Credit Impact Scores (CIS) reflect the overall impact of ESG on the credit rating of an issuer or transaction.

The rating agency's research shows that ESG attributes have a pronounced impact on credit ratings for 3% of rated entities and a discernible impact for 15% of scored entities. For these issuers or transactions, the rating is lower than it would have been if ESG risk exposures had not existed. Meanwhile, ESG factors have a positive impact on 3% of rated entities, leading to a higher rating.

"Sustainability trends – ranging from emerging green technologies, ageing populations to corporate risk management practices – can significantly affect credit quality across sectors and regions," said Rahul Ghosh, managing director and global head of sustainable finance at Moody's Ratings. "The complexity of these factors requires a systematic approach to integrating ESG considerations in credit ratings. With ESG credit analytics, scores and opinions for nearly 12,000 entities, Moody's Ratings is committed to providing the insight and rigour needed to serve capital market needs."

Other research by Moody's Ratings includes its proprietary carbon transition indicator (CTI), which aims to provide a consistent, transparent and verifiable means to analyse carbon transition risk for rated non-financial companies. Its CTI scores cover more than 360 companies across eight sectors, accounting for more than 27% of global emissions.

Last November, Moody's Ratings introduced net zero assessments (NZAs), which provide an opinion on how strong an entity's carbon transition plan is compared with a global net zero pathway, consistent with the goals of the Paris Agreement. The agency also provides second-party opinions on how labelled debt instruments or financing frameworks align with market principles and contribute to long-term sustainable development.