S&P Global Ratings has announced that it is "no longer publishing" new environmental, social and governance (ESG) credit indicators in its reports.
The decision comes after critics such as the Heritage Foundation, a conservative think tank, launched a campaign last year against ESG policies that it says are being used by the left as a social credit score to force businesses and financial institutions to adopt progressive ideologies across the globe.
Twenty-five Republican attorneys general also sent a letter to more than a dozen insurance companies in May 2023 that called out their efforts to push ESG priorities.
"In 2021, S&P Global Ratings began publishing alphanumeric ESG credit indicators for publicly rated entities in some sectors and asset classes. These indicators were intended to illustrate and summarize the relevance of ESG credit factors on our rating analysis through the use of an alphanumerical scale," the company said.
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But "after further review, we have determined that the dedicated analytical narrative paragraphs in our credit rating reports are most effective at providing detail and transparency on ESG," it added.
S&P Global Ratings says it "remains committed to providing the market with transparency on how and when environmental, social and governance (ESG) factors influence our assessment of creditworthiness" yet "effective immediately, we are no longer publishing new ESG credit indicators in our reports or updating outstanding ESG credit indicators."
Environmental, social and corporate governance — commonly referred to as ESG — are nonfinancial standards used by asset managers and investors in financial decision-making.
ESG investing is sometimes referred to as sustainable investing or impact investing, and investors can use ESG standards and criteria to screen potential investments and monitor nonfinancial risks.
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Environmental factors analyze how a corporation interacts with the environment. Criteria may include climate change, greenhouse gas emission, pollution or deforestation. Environmental factors may also analyze what risks the company faces from the environment, such as hurricanes or global warming.
Social criteria analyze a company’s relationship with its stakeholders and community. Criteria may include how the company contributes to nonprofit organizations or whether it encourages employees to spend time volunteering. Social factors also take into account how the company interacts with employees and whether it treats its workers and customers ethically.
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Governance refers to how the corporation is run and whether its leadership acts in an ethical way. Governance standards may include the makeup of the board of directors, use of political contributions or potential illegal activity.
FOX Business’ Kelsey Koberg, Brianna Herlihy and Kelly Laco contributed to this report.
