ISS STOXX New Rating Assesses Green Bond Risk at Issuance Level

• The new system evaluates a bond's sustainability and potential risks at the time of issuance.
• A 12-point grading method is used to identify the performance of each bond.

ISS STOXX, a top provider of research and technology solutions for the financial market, has launched a new sustainability bond rating through its sustainable investment division, ISS ESG.

The object of the rating is to assess the sustainability impact and risks of bonds labelled as green, social, sustainability, and sustainability-linked bonds (GSSS+).

This rating meticulously gauges bonds at the issuance level, unlike other methods, which assess only the issuer's overall sustainability performance. Hence, the rating provides detailed insights into a bond's sustainability contributions.

Over the past few years, the number of labelled bonds has increased significantly. However, varying regulations and market standards have impeded comparisons for investors. The new rating has been introduced to resolve this issue by providing a structured and standardised approach to evaluating labelled bonds. Here, the bonds are assessed pursuant to international sustainability standards.

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The new system entails a 12-point scale ranging from A+ (excellent) to D- (poor) to help investors identify the sustainability performance of each asset. Along with that, it also has supplementary data, such as alignment with the EU Taxonomy and the estimated greenhouse gas emissions of financed projects, to help investors customise their assessments based on their individual needs.

Till Jung, Head of ESG at ISS STOXX, said: "The volume and complexity of labeled bond issuances has increased significantly in recent years, against a backdrop of disparate regulatory and market reporting standards.

"Our new, differentiated offering addresses investors’ key need for comparative insights on the material sustainability risks and opportunities of a labeled bond at issuance level. This is significant as it is not just building an assessment based purely on general elements from the issuer’s activities and performance.”

The rating comes with many use cases for investors, including risk management, security selection, and impact assessment, to help them verify whether a bond meets sustainability goals. ISS STOXX provides this service through data feeds and APIs for easier access.

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Want to learn more about the newly launched sustainability bond rating? Click here to visit ISS STOXX's official website.

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Source: ISS STOXX