KBRA publishes research – Financial institutions: KBRA’s framework for integrating ESG risk management into credit ratings

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NEW YORK–(COMMERCIAL THREAD) – Kroll Bond Rating Agency (KBRA) publishes a study on our approach to integrating environmental, social and governance (ESG) factors into the credit rating process of financial institutions.

Key points to remember

  • When analyzing climate change risk exposure for financial institutions, we often assess the level of oversight of climate-related issues, including physical risks (like extreme weather) and transition risks, which are indirect and linked to an entity’s ability to meet pressure regulations to decarbonise either its own operations or those in its portfolio.

  • KBRA believes that financial institutions that adequately identify and quantify their climate-related risks will be in a better position to manage their exposure and mitigate those risks over the long term.

  • We believe it is important for issuers to demonstrate that they know and disclose the ESG preferences of their key stakeholders, and how these preferences can impact the operating, capital and financial strategies of the issuer. .

  • KBRA’s rating process for financial institutions will continue to incorporate an assessment of governance structures and their relevance to the size and complexity of the entity, but will also include a specific line of inquiry to highlight evidence of explicit strategies or programs to address ESG issues.

Click here to view the report.

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About KBRA

KBRA is a full service credit rating agency registered in the US, EU and UK, and is designated to provide structured finance ratings in Canada. KBRA ratings may be used by investors for regulatory capital purposes in several jurisdictions.


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