Beyond Ratings make play to become first ESG credit ratings agency
French research house Beyond Ratings has applied to become the world’s first credit ratings agency to integrate environmental factors into all of its ratings. The Paris-based firm, which was set up in 2014, specialises in analysing the default risk of sovereign issuers globally, with an enhanced focus on risks from energy and climate policies. In addition to its financial assessment, Beyond Ratings also offers non-financial ESG analysis. Current clients include French pension fund ERAFP and a number of undisclosed pension funds, asset managers and insurers in France, the US, the UK and the Nordics. To be able to perform full credit ratings – which use both qualitative and quantitative analysis – companies in Europe must be approved and regulated by the European Securities and Markets Authority (ESMA). Because it doesn’t have this status, Beyond Ratings has so far provided credit ‘scores’ – using solely quantitative data to establish default risk. It uses the traditional framework for credit ratings, but adds an additional pillar addressing the impact of energy, climate and natural resources on the creditworthiness of a country. But it is now in the process of applying to ESMA to secure approval to be a credit ratings agency. Supported by grants and loans from the French Global Environmental Fund and France’s development bank, Agence Française de Developpement (AFD), Beyond Ratings plans to widen its rating capabilities to include qualitative assessments, and broaden from the 85 sovereigns it currently rates to 140 by October, before rolling out to sub-sovereigns and public entities within 18 months. Eventually it will also expand to cover corporates. “With the help of the sponsors, we have designed a programme that will allow us within the next 18 months to make the transition towards a fully-fledged financial credit ratings agency,” Beyond Ratings’ CEO and co-founder Rodolphe Bocquet, told RI. Bocquet spent seven years as an equity derivatives specialist at Société Générale before qualifying in environmental engineering and working for public bodies including AFD.