IS Ratings for ESG Reporting and Sustainable Finance - ISCouncil
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As ESG reporting is set to become more regulated and Sustainable Finance solutions are growing in demand, organisations and financial institutions need reliable tools to help them understand and report on their sustainability performance.

IS Ratings can help provide data and assurance for ESG performance and tailor Sustainable Finance solutions for infrastructure assets.

IS Ratings for Lenders

IS ratings can support investors/lenders across a range of ESG/ Sustainable Finance investment philosophies.

IS Ratings for ESG reporting

IS Ratings can help financial institutions and investors access and report third-party assured ESG data for their infrastructure investments and, in the aggregate, their infrastructure portfolios.

IS ratings help identify the most material ESG metrics of an infrastructure asset and measure them during the design, construction and operation phases.

IS Ratings for Sustainable Finance 

IS Ratings can help tailor Sustainable Finance solutions for infrastructure assets.

How does it work?

  • IS ratings help identify suitable Sustainability Performance Targets (SPTs) by determining the most material ESG metrics of an infrastructure asset and providing a baseline for them.
  • IS ratings provide third party verification of key metrics compared to
    • business as usual (IS Design &AsBuild ratings), and
    • progress over time (IS Operations rating)
  • Targets can be set around specific criteria (e.g. emissions, waste) or overall ratings scores to suit the lender’s and borrower’s objectives
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IS Ratings for Asset Owners and Borrowers ​

IS ratings can support infrastructure asset owners and borrowers in preparing their ESG reports and in securing preferential financing through third-party assured ESG performance and data.

IS Ratings for ESG reporting​

​Stakeholders and regulators increasingly expect organisations to report on their social, environmental and governance performance. ESG reporting is becoming a minimum requirement and organisations need the right tools to monitor and report on key sustainability metrics.​

IS Ratings can help provide assurance for ESG performance and data on an asset level.​

Data that are provided as part of an IS rating include metrics on:​

  • Greenhouse gas emissions & reductions including embodied emissions for materials​
  • Waste volumes and diversion from landfill​
  • Materials use, including use of certified sustainable materials​
  • Water use, including alternative source substitution​
  • Community, health & well-being and safety data​
  • Risk & opportunity metrics including climate risk, natural hazards & resilience​
  • Ecological impacts​

​As such, IS Ratings certify outcomes and can help set up processes and generate data which feed into existing and emerging ESG/Sustainability reporting requirements such as TCFD, TNFD, ISSB.

IS Ratings for Sustainable Finance​

The value and proportion of “responsible investment” assets in the total market are growing rapidly. Green and sustainable financing products come in many forms and include sustainability-linked loans, green loans, social loans and green bonds. These products enable borrowers to signal their ESG commitments to external stakeholders and to access financial incentives for achieving sustainability objectives.​

IS ratings can support borrowers and owners in securing preferential financing for infrastructure assets through third party assured sustainability performance and data.​

How do sustainable finance products work?​

Green loans or Sustainability Linked Loans (SLLs) typically contain these core components:​

  1. Sustainability KPIs – set of measurable metrics that are material to the asset​
  2. Sustainability Performance Targets (SPT)s that the parties agree on​
  3. Loan Characteristics that link conditions (e.g. interest rates) to the meeting of SPTs​
  4. Reporting requirements against the progress on the SPT ​
  5. Verification requirements, e.g. via external auditors or assurance providers

How can IS Ratings be used in Green loans or Sustainability Linked Loans (SLLs) for infrastructure assets?​

  1. IS Ratings through the materiality assessments help identify the Sustainability KPIs that are the most material to the asset.​
  2. IS Ratings provide a benchmarking of the asset’s sustainability performance of key metrics against Business-As-Usual approach​
  3. IS Ratings enable ongoing performance monitoring of the asset’s key metrics (IS Operations tool)​
  4. IS Ratings provide independent third-party assurance for KPIs and SPT​

​IS ratings are available across ​planning, 

  • Design ​
  • Construction and ​
  • Operations phase of an infrastructure asset
  • Projects​
  • Programs and, from there​
  • Portfolios​

​

Example

Using the IS Operations rating in a Sustainability Linked Loan:

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Case study: Reliance Rail Refinancing

21-year A$1.8b green sustainability-linked loan tied to IS Operations rating

In March 2022, Reliance Rail secured a $1.8b green sustainability-linked loan tied to an IS Operations rating.

Reliance Rail is a public-private partnership (PPP) with the NSW Government, established in 2006 to deliver the Waratah train fleet and 30 years of maintenance. There were no contractual requirements to improve sustainability or obtain an IS rating.

Green Sustainability-Linked Loan (GSLL)

Reliance Rail, under the leadership of its CFO Louise Iida, secured the first sustainability-linked instrument for an Australian PPP and one of the first loans in Australia to be both green-certified and sustainability-linked. BNP Paribas, Commonwealth Bank of Australia (CBA) and National Australia Bank acted as joint sustainability coordinators. Sustainability performance targets (SPTs) over an initial 10-year period including IS Operations rating score is the most significant metric. Other metrics included the energy intensity of the trains and maintenance facility, solar PV generation and operational water intensity. Potential margin savings are available for 10 years, with a significant incentive to improve rating scores as early as possible.

Read the detailed case study here

Recording

IS Ratings for ESG & Sustainable Finance.

Watch our latest info session recorded on March 14, 2023 on IS ratings for ESG & sustainable finance.

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Stakeholder insights

When you think about infrastructure investing, they’re very capital-intensive projects that need to live for a long time. And whether you’re financing with debt or insuring or providing equity to these kind of projects, you need to know that they’ve got a long useful life in them not just in the bricks and mortar that you put in the ground, but in both the sort of social license to operate as well as just the business model that goes with them.

Adam Roberts, Senior Vice-President / Investment Director, Cerberus Capital Management

The frameworks and rating systems are critical to supporting the sustainable finance movement and markets going forward....Application of those frameworks and external ratings help provide confidence around those transactions for investors and lenders

Karl Eisenhammer, Head of Sales, AUS & NZ, Moody’s ESG Solutions

Investors bankers insurers all get involved and they’re in one way or another are involved in every project....So the fingers of the finance world are all over the place in terms of infrastructure

Rick Walters, Chief of Standards & Innovation, GRESB

The role of the private sector is becoming more necessary, more needed, so what investors think is becoming more and more important

Rick Walters, Chief of Standards and Innovation, GRESB

The majority of the global investment community are interested in supporting infrastructure projects that are driving positive long-term sustainable outcomes

Tania Smith, Director Sustainable Finance, ANZ

More Information

For more information about ISC’s Infrastructure sustainability ratings and how they can provide assurance for sustainable investments, please get in touch with Monique Isenheim at monique.isenheim@iscouncil.org