Today’s post reacts to an article in the Financial Times from Monday, entitled ‘ Oil and Gas Lobby moves to embrace green investors ’. There are some really concerning elements to the article (what it reports, not how it reports them) and the thought occurred that ESG rating agencies (aka Sustainability Rating Agencies, like Sustainalytics or MSCI) will have a massive role to play in guarding against so-called ‘ greenwashing ’ – where an entity would dress up their operations solely to look good to ESG investors, rather than actually committing to the principles – and, more importantly, whether they have the fortitude, capability, and authority to take on that vital role.   The article focuses on the development of a ‘ ESG Centre ’, a new initiative put together by the Independent Petroleum Association of America . The IPAA has enlisted the help of FTI Consulting, who as a business advisory and public relations firm, are now advising the trade body and its members of how to be...

The connection between the concept of ESG (Environmental, Social, and Governance) principles and the process of providing ‘ratings’ has been a common theme recently, for a number of reasons. On a number of occasions over the past few months, we looked at issues ranging from disclosure standards to sustainability rating agencies’ methodologies . This week, interestingly, the rating universe – that consisting of the credit rating and sustainability rating organisations – have been targeted, but for different reasons. However, both issues are concerned with the concept of ESG, which itself has been the centre of debate for a number of years. As the geopolitical landscape moves in different directions regarding the concept of sustainable finance , the rating universe is seeking to carve out its own place in the arena. However, there are a number of issues being revealed.   The first is one that was advanced by the head of Polymetal, the biggest London-listed producer of Gold. Vit...

In May of this year, Morningstar settled with the SEC for $3.5 million for violating regulations designed to protect against internal conflicts of interest . On Tuesday, the SEC announced that Kroll Bond Rating Agency (KBRA) had agreed to pay more than $2 million to settle charges relating to the ratings of commercial mortgage-backed securities (CMBS) and collateralised loan obligation combination notes (CLO Combo Notes) . In this short post, we will discuss the reality that transgressive behaviour is being witnessed across the industry, not just in the Big Three, and why that may be.   The settlement has been reported widely in the business press ( here and here for good examples). In relation to the actual charges that were put forward by the SEC, it argued that Kroll had permitted its analysts to make adjustments which went on to have material effects to the final rating, although those adjustments were not made on any analytical basis. Furthermore, it was alleged that the...