The Worldbank’s sister organisation has announced that it will add an environmental, social and governance (ESG) scorecard to its underwriter selection process.
This will impact banks that are currently handling the roughly 300 bonds issued each year, valued at $14bn (€12.3bn), according to the IFC.
It expects other issuers may follow suit.
John Gandolfo, vice president and treasurer at the International Finance Organisation (IFC), told Expert Investor that the scorecard’s objective is engagement. It sends a message to badly performing banks that they need to improve on ESG goals.
“ESG policies, guidelines, and tools developed by IFC are already being widely adopted as market standards. Incorporating ESG considerations into our dialogue with underwriters extends ESG application into yet another aspect of IFC activity,” Gandolfo commented.
Methodology
A spokesperson of the IFC explained to Expert Investor that it will not disclose its scorecard methodology at this point, but that rankings, produced from the scores, will feed into its decision-making process.
“We have run an underwriter scorecard for the last seven years and the ESG scorecard is now an additional component.
“This new component goes beyond ESG expertise or products offered to ESG practices in the bank,” the spokesperson said.
The IFC engages with around 40 banks on its funding programme, which have all received a survey on which the scorecard builds.
“There are 21 questions in the survey and while the responses will not be made publicly available either, we aim to share anonymised summaries of the responses with all underwriters, so that they can see how they are performing compared with each other,” the spokesperson added.
“The underwriter scorecards, which we already employ, are mainly based on quantitative factors such as arbitrage funding opportunities and secondary trading capabilities, with some qualitative input such as quality of coverage, investor relations outreach and ESG expertise,” the spokesperson said.
Year to date, the IFC said that it has issued over $11bn bonds in 29 currencies.
