UNEP Finance Initiatives Ratings Roundtable on Qualitative Risk

,8 January, 2003 | Paris, France Representatives from various rating agencies came together in Paris on 8 January, 2003 to discuss the issue of non-financial (sustainability / qualitative) risk and its implications for the rating industry. This group of senior executives representing credit, equity, governance, environmental and ethical rating agencies were joined by regulators to provide their perspectives on the topic and the perceived impact on their industry. Danièle Nouy, Secretary General of the , set the tone for the meeting with a presentation from the bank supervisory perspective. Opinions on the creditworthiness of issuers of securities and other financial obligations play a critical role in the investment decisions of both investors and the availability of capital to companies. Recent scandals have placed greater scrutiny on how and why company ratings are being conducted. Assessments by rating agencies define a globally uniform benchmark, and therefore are attractive as a reference for international regulatory standards to cope with the risk in increasingly interconnected financial markets. The questions arising from this observation with relation to sustainability issues are how are rating agencies evaluating the non-financial side of risk, and given the rapidly changing nature of material business risk, how should non-financial risk be assessed in the future by rating agencies?