Fitch Ratings has released its latest ESG Relevance Scores (ESG.RS) Update, assessing the influence of ESG factors on structured finance (SF) transactions and covered bond (CVB) programmes.
The ESG.RS system evaluates 14 ESG issues on a scale from 1 to 5, where ‘1’ indicates no relevance to credit ratings and ‘5’ signifies high relevance. Scores of ‘4’ or ‘5’ reflect factors that have a material impact—either positively or negatively—on rating decisions. While ESG.RS do not directly feed into Fitch’s credit ratings, they offer insight into the significance of ESG issues in individual transactions.
In the first half of 2025, ESG.RS were assigned to 4,691 Fitch-rated SF transactions and CVB programmes. For 82% of these, ESG considerations were found to be of low or no relevance to the credit rating. However, 836 transactions or programmes received elevated scores, suggesting ESG factors had a material role in those cases.
Among these, governance concerns were the most frequently cited, particularly in relation to asset isolation and payment interruption risk. Social factors were also evident, often tied to consumer protection and affordability within securitised mortgages and consumer credit. Environmental issues remain largely immaterial but are beginning to feature more prominently in specific transactions. Fitch has addressed this trend in its Structured Finance Physical Climate Risk Discussion Paper, which proposes a framework for assessing climate-related risks in structured finance and covered bond evaluations.
