ESG Ratings – For Corporate & Municipal Bond Issuers
As investors continue to integrate Environmental, Social and Governance (ESG) criteria into their investment and reporting frameworks, issuers are finding it critical to track, verify and optimize for these factors, not only to drive demand for upcoming offerings, but also to mitigate future market and regulatory risks
HIP Investor’s ESG Rating methodology utilizes measurable and quantitative factors to show data-driven impact results for municipal and corporate Issuers or Issuances, benchmarked against competitors within the same industry.
HIP provides quantitative analysis for fund holdings rolled up to a fund level rating to show data-driven impact results for investing in a fund or strategy.
This analysis is conducted on both an absolute and relative scale using 3 types of HIP Metrics:
- Management Practices
- Organizational and Operational Outcomes
- Products and Services Impacts
In addition to our proprietary ESG Rating framework, HIP also maps and assesses Issuer or Issuance’s alignment with external Impact / ESG frameworks including the:
- Identification of the combination of 17 UN Sustainable Development Goals (SDG) addressed by the issuer or issuance
- Verification and Rating for an issuances alignment with the International Capital Market Association (ICMA) Green, Social Sustainability Bond Principles
HIP Investor’s rating framework is applied to public and private companies and their debt issuances, municipal issuers and infrastructure projects, as well as mutual funds, ETFs, and investment portfolios.
Example: Farmland LP Sustainability Bond Rating
In January of 2021, Farmland LP issued a bond to support their ongoing investments in the conversion of agricultural land from conventional to regenerative farming practices which received the highest HIP Rating to date.
Farmland's rating was buoyed by its exceptionally strong performance in four of the seven pillars: Earth, Health, Trust Products & Services, all of which were 90.0 or above. Its Management Practices rating was in alignment with the overall, and it lagged on Equality.
Farmland's performance is benchmarked to sector peers and across the broader universe of HIP ratings to create relative ratings. In this case, the Management Practices, Health, and even the Equality metrics greatly exceed the sector averages.
The report goes into more detail as to the specific metrics evaluated, which can be partially seen in the two sample pages below.
The Official Rating documentation offers metric specific ratings and an in-depth description of performance for all 7 HIP Pillars. The example below shows Farmland LP's performance on the 5 major components of the HIP Health Pillar Rating with a more in-depth explanation in the report narrative: Health Benefits, Worker Safety, Employee Retention, Employee Satisfaction, and Customer Satisfaction scores.
The second page shows the degree to which the issuance is aligned with the UN SDG's. The colors may range from Red to Green, but in FLP's case, they are contributing to all the goals, truly an unusual and remarkable achievement!
