Figuring out how relevant ESG factors are to credit ratings of non-financial corporate issuers just got easier with a new heat map unveiled by Fitch Ratings.
The ESG heat map covers 51 different industry sectors and displays which individual entities are being impacted by the ESG topic identified within the sector.
The heat map includes an infographic and a downloadable Excel table, which lets users toggle between different relevance thresholds to see whether an ESG topic is relevant to an individual issuer, or whether it applies more generally as a trend affecting many issuers in a given sector.
Governance appears to have the broadest reach, with relevance for issuers across 39 sectors, followed by social risks in 27 sectors and environmental risks in 19 sectors.
ESG factors are credit relevant to at least one issuer in 45 of the 51 sectors. Ratings of 4 or 5 (out of a maximum of 5) indicate that the ESG factor is relevant to the credit rating. ESG elements with a relevance score of 4 or higher across 50% or more entities in a sector generally relate to broad social trends, such as pressures on drug pricing or changing consumer attitudes about tobacco. Elements affecting 20% or more of entities in a sector include tighter emissions standards and exposure to extreme weather events, which can impact the ratings of issuers in the oil sector.
Fitch Ratings will update the map regularly, as well as the underlying relevance score when each issuer's rating is reviewed. Fitch said the map was developed in response to investor requests for increased transparency into how ESG factors affect credit ratings. Since launching the ESG relevance scores in January, Fitch has published 75,000 relevance scores for more than 5,250 entities worldwide on various issuers including corporations, financial institutions, sovereign countries, and state and local finance entities.