In addition to the traditional (corporate and/or securities-based) ratings commonly obtained by an issuer in connection with an international debt offering, corporates may now avail themselves of a new metric — the ESG rating. To date, there is no consensus on how ESG ratings, which assess a company's ESG performance, are derived or what they reflect.
As more corporate bonds are issued linked to ESG ratings, these ratings will become more material, and a consensus around how ESG ratings should be disclosed and regulated will directly impact their reliability. Baker McKenzie lawyers Rob Mathews, Ben Bierwirth and Elaine Baynham from our London office consider some of the challenges posed by ESG ratings in the context of debt securities offerings.
* This article was first published in the International Financial Law Review