Governance is the most influential ESG factor for both banks & NBFI:Fitch

While Customer Welfare - Fair Messaging, Privacy & Data Security, and Exposure to Social Impacts are rarely relevant to credit ratings currently, Fitch considers them potential rating drivers for the majority of sectors.

 

Hong Kong/New York/London:

Fitch Ratings has launched an ESG 'heat map' covering 29 different sub-sectors for Financial Institutions to provide further insight into the relevance of Environmental, Social, and Governance (ESG) factors to credit ratings.

 

The heat map shows Governance is the most influential ESG factor for both banks and Non-Bank Financial Institutions (NBFI), as found in Fitch's report ESG Factors Influencing Financial Institutions Ratings.

 

Governance Structure issues are most often relevant for financial institutions overall, but Management Strategy (defined as the operational implementation of strategy) issues are more common for NBFIs. 

 

Environmental risks are mainly borne by insurers with exposure to catastrophic risks, such as reinsurers and non-life insurers operating in certain regions. 

 

Social risks for financial institutions are rare and tend to be issuer specific, with no social element relevant to the credit ratings for more than 1% of any sector. 

 

While Customer Welfare - Fair Messaging, Privacy & Data Security, and Exposure to Social Impacts are rarely relevant to credit ratings currently, Fitch considers them potential rating drivers for the majority of sectors.

 

The map is designed to help users understand how relevant individual ESG topics are to credit ratings for different sub-sectors across Banks, Insurance and NBFIs.
 


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