ISS STOXX, the sustainable investment arm of Institutional Shareholder Services (ISS), has announced the launch of a new Sustainability Bond Rating.
This innovative system provides an issuance-level assessment for bonds labeled as green, social, sustainability, and sustainability-linked (GSSS+) issued by both corporate and sovereign entities.
The introduction of this rating system comes at a time when the volume and complexity of labeled bond issuances are growing, amidst varying regulatory and market reporting standards. Till Jung, Head of ESG at ISS STOXX, emphasized the importance of this development, stating, “Our new, differentiated offering addresses investors’ key need for comparative insights on the material sustainability risks and opportunities of a labeled bond at issuance level.” He highlighted that the assessment is not merely based on general issuer activities and performance but offers a targeted, in-depth analysis at the bond issuance level.
The Sustainability Bond Rating supports various investor needs, from risk management to fulfilling reporting requirements and selecting securities aligned with sustainability strategies. Specifically, it aids in verifying labeled bonds’ external framework certifications, aligning with the EU Taxonomy, and identifying bonds relevant to specific sustainability strategies of issuers. Additionally, it facilitates impact investment use cases, such as tracking the allocation of bond proceeds and verifying impact targets throughout the bond lifecycle.
The new system aligns with international standards set by the International Capital Market Association (ICMA) and the United Nations Sustainable Development Goals (SDGs). It features a 12-point grading scale, ranging from A+ (excellent performance) to D- (poor performance), and evaluates approximately 400 indicators to determine a bond’s sustainability score. The ratings encompass three dimensions: Alignment with International Standards, Environmental and Social Impact Assessment, and the Issuer’s Sustainability Strategy. Each dimension is broken down into specific topics and indicators, offering a comprehensive and granular analysis.
ISS STOXX plans to deliver the Sustainability Bond Rating through multiple channels, including data feeds and an API, to ensure easy and efficient integration for clients.
This new tool is expected to enhance transparency and decision-making in the sustainable investment landscape, providing crucial insights into the sustainability impacts and risks associated with bond investments.
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