ESG Disclosure Initiative

Environmental, Social and Corporate Governance, or ESG, investing has now hit the mainstream as a consideration – and increasingly a key driver – of investment approaches and analysis for individuals and institutions alike. ESG investing has its roots in what began as ‘socially responsible’ investing in the 1960s, when investors began to screen their investment opportunities based on industry involvement such as tobacco production and sales or a company’s dealings in South Africa with respect to the apartheid regime. Today, there is broad acceptance and interest in ESG investing with the existence of targeted mutual funds, indices, and there is also a growing focus on data availability and analysis by ratings agencies and analytics firms.

Environmental: Climate change, Natural resources, Sustainability
Social: Diversity, Human rights, Consumer protections
Governance: Corporate governance, Corporate behavior, Compensation structure

The above categories are high level and only scratch the surface of the ESG-relevant activities that investors – and issuers – may choose to focus on.

For our part, the Structured Finance Association has very recently launched an effort to assess how ESG investing and reporting can be applied and accessed in the securitization market. As a jumping off point the Association has begun work on identifying a framework for reporting on ESG factors within the assets of ABCP vehicles at the conduit level.

On December 5, 2019, SFA held an ESG Symposium that brought together nearly 200 engaged participants for a day-long conversation to promote ESG principles within the structured finance market.

SFA has published Key Takeaways from the Symposium which can be downloaded via the link below. Additionally, some of the slides that were presented by our guest speakers are available below.

Below please find slides from some of the presenters:

• ESG Investing through Indices (Reid Steadman, Managing Director, Global Head of ESG – S&P Dow Jones Indices)
• ESG and Sustainable Finance: Are we there yet? (Libby Bernick, Head of Sustainability – DBRS Morningstar)
• Moody’s ESG Framework (Swami Venkataraman, Senior Vice-President – Moody’s)
• Environmental, Social and Governance (ESG) Risk Scoring for Structured Finance (Marjan van der Weijden, Global Head of Structured Finance – Fitch Ratings)
• ESG Credit Factors in Structured Finance (Matt Mitchell, Director, Structured Finance – S&P Global Ratings), these slides are derived from this report “Environmental, Social, and Governance: ESG Credit Factors in Structured Finance”

The symposium encouraged important dialogue among a broad range of market participants and SFA looks forward to hosting additional ESG events in the future.

If you’re interested in joining SFA’s ESG Task Force, please email Jeff Gudiel at jeff.gudiel@structuredfinance.org.

The Credit Ratings Subcommittee of the Fixed Income Market Structure Advisory Committee (FIMSAC), an advisory group to the SEC, is considering the role of NRSRO credit ratings in various financial markets, including the exploration of potential conflicts of interest in industry payment models. After soliciting feedback from industry participants on this topic, the FIMSAC subcommittee set forth recommendations aimed at improving both transparency and potential outcomes for investors.

SFA’s Credit Ratings Process Task Force submitted feedback to the FIMSAC regarding the oversight and regulation of NRSROs. To join our task force, please contact Alyssa.Acevedo@structuredfinance.org.