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Thursday, 28 January 2021

Fitch Ratings launches interactive tool to enhance risk heatmap for 1,039 financial institutions

The new tool demonstrates overall perception of risk among banks, insurers and non-bank financial institutions

Doaa A.Moneim , Thursday 3 Sep 2020
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Fitch Ratings has launched an interactive environmental, social and corporate governance (ESG) dashboard for financial institutions, a tool that shows the distribution of Fitch's ESG Relevance Scores (ESG.RS) for 1,039 global banks, insurers and non-bank financial institutions (NBFIs).

Fitch has also updated and enhanced the interactive ESG Relevance heatmap for the second quarter of 2020 with regional and sub-regional selection capabilities.

In a statement, Fitch clarified that users of the new dashboard can adjust it by region, sub-region, sector and sub-sector, adding that tool also shows the distribution of ESG.RS changes in the second quarter of 2020 and will be updated and published each quarter.

The dashboard shows that ESG risks influence rating decisions for 20 percent of banks, three percent of insurers and 28 percent of NBFIs as of end-June 2020, with governance risks once again the most relevant for rating decisions (15 percent of financial institution issuers, compared to two percent for social risks and one percent for environmental risks, according to the statement).

"This represents a decrease in relevance across sectors since the ESG.RS were launched for financial institutions on 25 February 2020, when ESG risks influenced rating decisions for 22 percent of banks, six percent of insurers and 34 percent of NBFIs," said Fitch.

ESG risks are more relevant for emerging market rating decisions, with 28 percent of issuers, compared to nine percent of issuers in developed markets, Fitch said.

There were 35 decreases in ESG.RS for individual elements in the second quarter of 2020, compared to eight increases, for 764 issuers with updated scores over this period. These individual score changes drove an increase in overall ESG Relevance for four issuers and a decrease for 12.

In addition, 29 score changes were in the governance category, consistent with findings that governance risks are the most relevant to credit profiles.

Overall ESG Relevance decreased two percent and increased for only 0.2 percent of bank issuers with updated scores.

In contrast, overall ESG Relevance increased for five percent of NBFIs with updated scores, with no cases of decreases. There was no change in overall ESG Relevance for insurers.

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