Credit market investors say that consideration of ESG has become increasingly important over the last 12 months when conducting risk assessments, and they are intensely focuses on the risks posed by climate change, according to findings from an industry study.
Ninety-four percent of high yield and leveraged loan investors say that climate change risk assessment is an important part of internal credit risk analysis, the European Leveraged Finance Association (ELFA) found in its 2021 ESG survey.
Limited partners and investors have stepped up their requests for climate change data on the portfolio level over the last 12 to 24 months, according to 78% of asset managers focused on high yield and leveraged loan bonds who participated in the study.
The findings, which came from the European Leveraged Finance Association’s 20201 ESG survey, were released days ahead of the United Nation’s COP26 climate change conference scheduled to take place in Scotland.
Within the Sustainable Financial Disclosure Regulation (SFDR), information about emissions was the most requested, the ELFA found.
“There is a rising need for asset managers to respond to investor and regulatory demands for ESG data at the portfolio level,” according to a statement from Sabrina Fox, chief executive officer of the European Leveraged Finance Association. “Efforts have been fragmented as the market still works towards consensus on the necessary types of disclosure.”
Lately, the ELFA has been focused on addressing disclosure issues directly, including launching a new round of ESG Fact sheets.
While ELFA conducted the 2021 survey to gain insights on investor priorities ahead of the COP26 climate summit, Fox said, the surveys remain open so that the industry group can continue to gain insights from its members.
The ELFA study also gained insights from private debt investors, including:
- 81% of private debt respondents said investors and limited partners routinely ask about ESG during meetings
- 90% who said that a lack of ESG information, or unsatisfactory findings would cause them to turn down investment opportunities
- 85% who responded that they regularly monitor specific ESG metrics of investee companies, including 71% who review them annually
