-

KBRA Releases Research – KBRA Has a Clear Focus on Credit Ratings, Not ESG Scores

NEW YORK--(BUSINESS WIRE)--KBRA releases research that details its approach to environmental, social, and governance (ESG) topics that affect credit markets and individual issuers. As a credit rating agency, KBRA has judiciously avoided the inclusion of a distinct ESG scoring system into its credit rating methodologies and reports. This approach is backed by extensive issuer and investor feedback which found the merging of ESG scores—often including factors that do not impact the credit analysis—is confusing. In fact, KBRA believes ESG scores are a disservice to market participants.

Credit ratings have a well-understood purpose, namely, they provide an opinion of the creditworthiness and risk of default of an issuer or transaction. Conversely, an ESG rating is not as precise because it considers a variety of ESG factors—many of which are not tied to financial performance, creditworthiness, or provide objective standards of comparison. Instead, they assess wider impacts on society and the environment, which often rely on value-based judgments. In our view, ESG scores that have no impact on a credit rating should be kept separate from credit ratings.

Key Takeaways

  • Rating agencies have rushed to deliver ESG ratings or scores. KBRA has taken a more disciplined approach, providing credit ratings only while striving to become an important source of ESG analysis for the credit markets.
  • ESG ratings are often value-based without objective criteria. The ESG rating can simply reflect a preference for one set of outcomes over another.
  • Credit ratings are established and well understood. When they are commingled with poorly defined ESG scores, it confuses market participants.
  • KBRA incorporates ESG factors into our rating analysis only when they effect credit risks. ESG factors more frequently relevant to credit include but are not limited to costs and risks related to climate, cybersecurity, and the management of differing stakeholder interests.

Click here to view the report.

Related Publications

About KBRA
KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

Contacts

Paul Kwiatkoski, Senior Advisor, ESG
+1 (646) 731-2387
paul.kwiatkoski@kbra.com

Pat Welch, Chief ESG and Ratings Policy Officer
+1 (646) 731-2481
patrick.welch@kbra.com

Karen Daly, Senior Managing Director
+1 (646) 731-2347
karen.daly@kbra.com

Business Development Contacts

Bill Baneky, Managing Director
+1 (646) 731-2409
william.baneky@kbra.com

James Kissane, Senior Director
+1 (213) 806-0026
james.kissane@kbra.com

KBRA

Details
Headquarters: New York City, New York
CEO: Jim Nadler
Employees: 400+
Organization: PRI

Release Versions

Contacts

Paul Kwiatkoski, Senior Advisor, ESG
+1 (646) 731-2387
paul.kwiatkoski@kbra.com

Pat Welch, Chief ESG and Ratings Policy Officer
+1 (646) 731-2481
patrick.welch@kbra.com

Karen Daly, Senior Managing Director
+1 (646) 731-2347
karen.daly@kbra.com

Business Development Contacts

Bill Baneky, Managing Director
+1 (646) 731-2409
william.baneky@kbra.com

James Kissane, Senior Director
+1 (213) 806-0026
james.kissane@kbra.com

More News From KBRA

KBRA Assigns Rating to MSC Income Fund, Inc.'s $150 Million Senior Unsecured Notes Due 2029

NEW YORK--(BUSINESS WIRE)--KBRA assigns a rating of BBB- to MSC Income Fund, Inc.'s (NYSE: MSIF or “the company”) $150 million, 6.34% senior unsecured notes due 2029. The rating Outlook is Stable. The proceeds will be used for repayment of existing secured indebtedness. Key Credit Considerations The rating is supported by MSIF’s well diversified $1.3 billion investment portfolio spread among 150 portfolio companies (including equity investments) across 30+ industries as of 4Q25, with ~77% of it...

KBRA Assigns Preliminary Ratings to Sequoia Mortgage Trust 2026-MED1 (SEMT 2026-MED1)

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to 23 classes of mortgage pass-through certificates from Sequoia Mortgage Trust 2026-MED1 (SEMT 2026-MED1). SEMT 2026-MED1 represents the first publicly-rated RMBS backed by loans originated pursuant to Physician or Doctor Loan underwriting programs. These loans, which KBRA generally refers to as Medical Professional Mortgages (MPM), typically originated through specialized prime mortgage programs designed for borrowers in the healthca...

KBRA Releases Research – Middle East Conflict: Credit Implications

NEW YORK--(BUSINESS WIRE)--KBRA releases research that explores the potential credit implications of the war in Iran, examining both the near-term implications and the potential ramifications of a prolonged conflict. The most immediate risks stem from the disruption to traffic through the Strait of Hormuz, alongside broader operational disruption and security risks in the region. Direct exposure across KBRA-rated transactions is limited, although a prolonged conflict could, over time, weaken ma...
Back to Newsroom