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Pricing ESG risk in credit markets: reinforcing our conviction

Home / Perspectives / Pricing ESG risk in credit markets: reinforcing our conviction

Mitch Reznick, CFA, Co-Head of Credit and Head of Credit Research
Michael Viehs
03 October 2018
Credit

To analyse credit risks with greater precision, we developed a pricing model last year to capture the influence of environmental, social and governance (ESG) factors on credit spreads. It showed a convincing relationship between ESG risk and credit spreads, manifesting as an ESG-risk curve.

After expanding this research, we found this relationship between ESG risk and credit spreads to be reinforced.

 

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Mitch Reznick, CFA Co-Head of Credit and Head of Credit Research Mitch joined Hermes in February 2010 as head of research on the Hermes Credit team. Prior to this he was co-head of credit research for the global credit and hybrids team at Fortis Investments. Other roles at Fortis included portfolio manager of European high yield funds, based in London, and senior credit analyst, based in Paris. Before this he worked as an associate analyst in the leveraged finance group at Moody’s Investors Service in New York. Mitch earned a master’s degree in International Affairs at Columbia University in New York City and a Bachelor’s degree in History at Pitzer College, one of the Claremont Colleges in California. He is a CFA charterholder; a member of the Capital Markets Advisory Committee of the IFRS Foundation, the Association for Financial Markets in Europe High Yield Investor Committee, and the Credit Advisory Committee for the PRI; and a workstream member of the UK-China Green Finance Task Force.
Read all articles by Mitch Reznick, CFA
Michael Viehs Dr Michael Viehs is responsible for intelligent proxy voting in Germany, corporate engagements on environmental, social, and governance issues and for conducting research on sustainability and responsible investing with a focus on consumer goods and retail, mining, oil and gas, pharmaceuticals and utilities. Before his appointment at Hermes EOS, Michael was research director at the Smith School of Enterprise and the Environment at the University of Oxford and visiting assistant professor at the School of Business and Economics at Maastricht University in the Netherlands. Michael is a visiting research associate at the University of Oxford and a research affiliate with the European Centre for Corporate Engagement. He presented his research at several top academic and industry conferences in Germany, the Netherlands, Sweden, Spain, the UK, the US and South Africa. Michael holds a BSc in International Business Economics, an MSc in International Business and a PhD in Finance from Maastricht University.
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