Moody’s Ratings – having submitted for every region in the IJGlobal ESG Awards 2024 for the secondary opinion provider category – won over the independent panel of judges to pick up the global trophy.

One of the judges said: “Moody’s is continuing to adapt and adjust metrics to support growth and changes in the ESG field.”

The rater’s submission states: “As global market demand for independent views on the credentials of labelled green, social, sustainability and sustainability-linked debt issuance continues to grow, we have enhanced and expanded our capabilities.”

Moody’s in October 2022 published a framework to provide SPOs on sustainable debt. This assessment framework explains the general approach taken in providing second party opinions (SPOs) of green, social and sustainability financial instruments (e.g., bonds or loans) or financing frameworks following either a use of proceeds or sustainability-linked approach.

The SPO also provides a score that indicates an opinion of the overall sustainability quality of the financial instrument or financing framework on a 5-point scale, providing investors with a consistent and granular standard for comparison across sectors and regions.

The submission continues: “The growth of our proprietary SPO offering will strongly position the agency to meet market participant needs for rigorous, consistent, and independent analysis of the sustainability credentials of labelled debt.”

The Moody’s financing framework is a document prepared by an issuer that sets out how proceeds from instruments to be issued in accordance with the framework will finance expenditures for addressing sustainability matters.

Among other goals, the analytical considerations incorporated into its SPO approach seek to differentiate between financial instruments and financing frameworks that have a meaningful contribution to long-term sustainable development and those for which the green or social impact may be overstated or unclear, including by considering the coherence of the financial instrument or financing framework in the context of an issuer’s sustainability strategy.

Across the SPO portfolio, roughly 15% of structures assessed score SQS1 (excellent), 68% score SQS2 (very good) and 14% score SQS3 (good). Just 4% of the portfolio scores SQS4 (intermediate).

The rater states: “In establishing SPOs, we may consider data, information or assessments found in or calculated or estimated from an issuer’s public disclosures, in particular the financial instrument documentation or financing framework; from published research or indicators (e.g., proprietary scores) of Moody’s Ratings or other Moody’s entities; or from relevant third-party sources. We may also use non-public information provided by the issuer.

“Our SPO assessment framework is applicable globally to a wide variety of financial instruments and financing frameworks, including those issued by corporate entities (45% of the total Moody’s Ratings SPO portfolio), project and infrastructure finance (16%), financial institutions (20%), sovereign and supranational issuers (7%), regional and local governments (8%) and structured finance vehicles (4%).

“In determining the applicability of the SPO assessment framework, we will review the specifics of each financial instrument or financing framework.”