The Role of External Ratings when Engaging with Clients
Martin McAspur-Lohmann
In this video, Martin McAspurn-Lohmann explores the role of external ratings and strategic client categorisations in financial institutions. Learn how ratings influence portfolio management, funding decisions, and product development in the evolving landscape of the energy transition.
In this video, Martin McAspurn-Lohmann explores the role of external ratings and strategic client categorisations in financial institutions. Learn how ratings influence portfolio management, funding decisions, and product development in the evolving landscape of the energy transition.
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The Role of External Ratings when Engaging with Clients
12 mins 34 secs
Key learning objectives:
Understand the role of external ratings and ESG scores in financial decision-making
Understand different client categorisation strategies for financing the energy transition
Identify how financial institutions use ratings for net zero portfolio management
Overview:
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Agencies use various methodologies to evaluate companies' exposure to climate transition risks, physical climate risks, governance frameworks, and sustainability performance metrics. S&P, for example, integrates ESG factors directly into its credit ratings, while Moody’s Carbon Transition Indicators assess emission reduction targets and alignment with global climate goals. These assessments help financial institutions understand long-term credit stability and investment risks.
How do financial institutions use ratings in portfolio management?
Financial institutions rely on external ratings to assess and categorise clients based on their transition plans. The Glasgow Financial Alliance for Net Zero (GFANZ) outlines four key financing strategies:
- Financing Climate Solutions – Supporting companies driving decarbonisation, like renewable energy firms
- Investing in Aligned Companies – Funding businesses already aligned with the 1.5°C pathway
- Supporting Transitioning Companies – Assisting firms working towards alignment, such as automakers shifting to EVs
- Managing High-Emitting Assets – Phasing out high-carbon assets responsibly to avoid economic disruption
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Martin McAspur-Lohmann
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