In fact, regulators including the U.S. Securities and Exchange Commission and the Municipal Securities Rulemaking Board are taking a look at ESG issues in financial markets. The MSRB earlier this year concluded a request for information around ESG disclosure, with some respondents pointing to a lack of clear data from issuers.
“We have heard a lot of investors say, ‘When I see an ESG score, I’m not quite sure what to make of that,’” said Patrick Welch, head of ESG at Kroll Bond Rating Agency, a smaller company.
Welch said Kroll focuses only on factors with a clear tie to the underlying credit’s risk of default. The company called ESG scoring confusing and “a disservice to market participants” in a report published May 12.
While no state officials have said they will stop working with any of the rating companies, they’re keeping their options open. “We’re carefully monitoring who we do business with,” Arizona’s Yee said.
--With assistance from Joe Mysak.
This article was provided by Bloomberg News.