EIT Climate-KIC supported Beyond Ratings registered as credit rating agency by European Securities and Markets Authority

EIT Climate-KIC supported firm Beyond Ratings, a financial services company that specialises in environmental, social, and governance (ESG) analysis, has now been designated a credit rating agency by the European Securities and Markets Authority (ESMA).

ESMA is the single direct supervisor of credit rating agencies (CRAs) in Europe. Its mandate stems from the EU’s CRA regulation, which ensures a common framework and minimum quality standards for credit ratings issued in the European Union. ESMA’s decision allows Beyond Ratings to issue ratings for central, regional, and local governments as well as policy-driven financial institutions.

“We believe ESMA accreditation validates our central proposition that ESG analysis is essential to evaluate all manner of risks, including credit risks of sovereigns, sub sovereigns, and development banks”, said Rodolphe Bocquet, CEO and co-founder of Beyond Ratings. “ESMA registration has been an objective since the firm’s founding in 2014 and will enable us to expand our ESG platform for positive finance.”

Elie Hériard-Dubreuil, Managing Director who oversaw the ESMA application, comments: “We believe that our ratings will enable investors to consider a broader set of risk factors. We maintain that investors who ignore ESG do so at their peril”.

EIT Climate KIC has provided substantial assistance to Beyond Ratings. This took the form of financial support as well as building a network of experts. Bocquet provides further detail on this support: “EIT Climate-KIC first supported us in developing a key innovation of our credit rating methodology to integrate to what extent physical climate risk can impact sovereign bond issuers’ creditworthiness.”

“The work of Beyond Ratings in developing the sovereign credit rating methodology and the establishment of the credit rating agency bridges a critical gap – tying climate and physical risk to financial profiles of sovereigns. This is an important area of work towards the impact we want to see – to mainstream climate in financial markets, which is a priority at our  Mission Finance initiative at EIT Climate-KIC,” says Riyong Kim, Head of Programmes, Decision Metrics and Finance, EIT Climate-KIC.

Beyond Ratings is the commercial venture associated to an initial three-year academic research programme “RISKERGY”. This programme focused on developing innovative macro-economic and financial modelling to better account for energy as a production factor for national economies. Integrating climate change related risks, both physical and transition risks, was one of the company’s first targets.

As Bocquet says, “climate change risks in financial sovereign ratings will prove to be a powerful incentive to ensure that capital flows will be channelled towards low carbon development pathways.”

About Beyond Ratings

Based in Paris, France, and incorporated in 2014, Beyond Ratings provides innovative services to assist the financial sector in the transition towards sustainable trajectories. As a CRA, Beyond Ratings will be able to issue ratings to public issuers (sovereign, local and regional governments, and policy-driven financial institutions), based on methodologies which systematically integrate ESG factors into the analysis framework.