Amid the growing ESG investment that takes account of environmental (E), social (S) and governance (G) factors, R&I will contribute to the expansion of the ESG-related capital market by providing ESG-related services.
There are two major services which R&I provides as ESG-related services: (1) Second Opinion for ESG-related finance; and (2) “R&I Green Bond Assessment” which evaluates the extent to which the financing makes contribution to green projects.
For ESG-related finance, it is encouraged to obtain third-party evaluation as shown in the cases for green bonds, social bonds and sustainability bonds. R&I provides such third-party evaluation as Second Opinion. Second Opinion is a third-party evaluation verifying whether the eligible financing is in conformity to related principles, etc. For example, R&I’s Second Opinion addresses the following principles: Green Bond Principle, Social Bond Principle and Sustainability Principle of the International Capital Market Association (ICMA); Sustainability Linked Loan Principle (SLLP) of the Loan Market Association (LMA), Loan Syndications and Trading Association (LSTA) and Asia Pacific Loan Market Association (APLMA) and the Principles for Positive Impact Finance of the United Nations Environment Programme Finance Initiative (UNEPFI). R&I’s approach to such principles can be found here.
Ratings evaluate the degree of possible sustainable effects as a result of the use of proceeds from ESG-related financing; and they are shown in symbols. For green finance, R&I provides “R&I Green Bond Assessment (R&I GBA)” which evaluates the extent to which the procured funds are used for resolving environmental issues. R&I GBA is graded in five levels.
ESG-related services is not the Credit Rating Business, but one of the Ancillary Businesses (businesses excluding Credit Rating Service but are ancillary to Credit Rating Activities) as set forth in Article 299, paragraph (1), item (xxviii) of the Cabinet Office Ordinance on Financial Instruments Business, etc. With respect to such business, relevant laws and regulations require measures to be implemented so that activities pertaining to such business would not unreasonably affect the Credit Rating Activities, as well as measures to prevent such business from being misperceived as the Credit Rating Business.