Susan Gray, global head of sustainable finance business and innovation at S&P Global Ratings, spoke to several entities who have conducted an S&P Global Ratings ESG Evaluation and she shares the results as to how the evaluation helped them connect with investors and stakeholders about understanding their ESG goals.
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- A debt offering that was 11x oversubscribed
- A direct linkage to current financing
- Increased credibility from investors
- A greater understanding of governance strengths and weaknesses
Investors Aligning Their ESG Strategy With Business Strategy
Over the last months, our "ESG - The New Differentiator" webcast series has featured many companies, financiers and investors who are navigating the quickly developing world of ESG and charting their own course – whether it be aligning their ESG strategy with business strategy, raising capital or working with clients as legal advisers or bankers. I wanted to share some of their comments and insights in this regular blog.
Companyies’ comments often center on a common theme: They saw a critical need to communicate their ESG strategy in the context of their business strategy to their stakeholders, often over the long term.
- American Water – a US water Utility – wanted to “enhance investor engagement” and “demonstrate the long term value strategy of the company”
- EP Infrastructure – a multi asset energy and renewables portfolio company of Macquarie, was looking to differentiate itself and show investors how it had integrated ESG considerations into its strategy.
- Másmovil – a Spanish telecommunications service provider – was looking to link its sustainability strategy to its loan facilities to improve pricing over time.
- Thames Tideway – a major tunnel being constructed under the River Thames – was looking to clearly articulate its ESG purpose and support dialogue with shareholders and investors.
S&P Global Ratings ESG Evaluation
Each of these companies has published an S&P Global Ratings ESG Evaluation – which involves a deep dive into historic data as well as analyst meetings with a company board member and management - as a core element of their communication strategies. Why? As we know, public and private investors and other stakeholders are increasingly interested in better understanding a company’s ESG strategy and future plans.
These firms chose the S&P Global Ratings ESG Evaluation as a key channel of transparency for their ESG journey.
- American Water accelerated publication of its S&P Global Ratings ESG Evaluation to coincide with a $US1b capital markets offering. Ed Vallejo, VP Investor Relations said “Our bankers advised us that they saw much value in being able to access ESG investors with a recent S&P Global Ratings ESG Evaluation. Our overall, long-term debt offering was 11x oversubscribed. Whilst we can't confirm that we reached that level of oversubscription because of the ESG Evaluation, we did, and we continue to get positive feedback and many credits from a broad spectrum of investors and we are very appreciative of it.”
- EP Infrastructure’s CFO Filip Belak said “From a financing perspective, the really detailed report on our ESG matters has benefitted our investors. They see the pros and cons and how the company sees the future and how it is fit for the future (preparedness). We have also used it internally to help identify strengths and weaknesses to focus on in both near and long-term.’”
- Másmovil’s CFO Jose Maria Del Corro Garcia-Lomas noted that “Másmóvil’s current financing is completely linked to the S&P Global Ratings ESG Evaluation. This means that if the ESG Evaluation score goes up next year then we will receive a premium which will reduce the price of the loan. Given our commitment to sustainability we are hopeful it will go in this direction.
In the near-term, the ESG Evaluation has helped us gain credibility from investors who are starting to demand more information.”
- Thames Tideway Treasurer Ines Faden da Silva said “We now have a document that helps us frame our message internally and externally to investors.
It has saved us work as we had to go through the data collection process for the ESG Evaluation. This meant we could re-use the information gathered.
The majority of ESG ratings are investor-led with different methodologies that are sometimes very opaque for issuers. It was important for us to have an assessment where the issuer has some input.’