Matthias Hellstern

What is the key to successfully developing the sustainable finance movement?

Hellstern: Moody’s expects rapid growth in sustainable finance offerings to continue, with the $1 trillion mark in global sustainable debt issuance surpassed for the first time in 2021. In recent years, we have also seen increased innovation and diversification in the range of offerings – from green to socially oriented to, most recently, sustainability-linked bonds.
Such growth, diversification and also the increasing interest by issuers and investors go hand in hand with an increasing degree of scrutiny by market participants. These require transparent and accurate assessments that provide detailed insights into the sustainability criteria of bond issues or loan extensions by organisations or their broader activities. The sustainable finance market will need to see continuous improvements in key performance indicators, reporting and related standards.
The evolution of the sustainable investment movement will also require a more systematic consideration of the impact of ESG aspects – environmental, social and governance – on credit quality. In recent years, Moody’s has increased transparency on how material ESG and climate considerations are incorporated into its credit analyses. This includes the use of segment-specific heat maps and ESG credit scores that show how material ESG aspects are to a given credit rating or credit quality at the industry and issuer level. For example, our most recent Environmental Heat Map identified 15 industries with $4.2 trillion in rated debt that are highly or very highly exposed to environmental risks. We are also introducing ESG scores for debt issuers globally, including sovereigns, regional and local governments, industrials, financial institutions and multilateral development banks, which assess the extent to which an issuer is exposed to ESG factors and the impact these have on its overall ratings.

What is Moody’s role in this?

Hellstern: As a provider of integrated risk assessments, Moody’s can combine its extensive expertise in ESG, climate and natural catastrophes with its long experience in modelling financial risks and their economic consequences. This allows us to offer a wide range of solutions to help companies incorporate sustainability into their business decisions.

Our innovative second party opinions (SPOs) on green, social or sustainability-linked bonds and loans, for example, help provide greater clarity on the sustainability impact of the proceeds and the extent to which they are consistent with strategic frameworks and market standards.

Moody’s is also working with industry-wide initiatives such as the Task Force on Climate-related Financial Disclosures (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD) to help develop appropriate reporting frameworks and standards.

What is your personal goal?

Hellstern: It is my goal, through my work at Moody’s, to support the importance of the transformation to a zero-emission world. This is done through my involvement as part of the GSFCG, but also by approaching and discussing with company representatives their strategies on how to achieve the transformation. It is also important for us to understand what hinders the transformation and how the framework conditions need to evolve in order to successfully implement the transformation. This also includes that these findings are passed on in facilitating organisations, such as the GSFCG, but also in other fora. This should help to adapt the framework conditions in such a way that the transformation succeeds, while at the same time maintaining the performance – and thus also the creditworthiness – of the companies.