A new offering from ISS ESG, an environmental, social and governance-focused data firm, provides issuers with an ESG score, report and all supporting data used to determine thescore, aimed at enhancing state and local government officials ability to communicate with various market participants.
“We’re evening the playing field because now issuers can have access to all the data [the buy-side and sell-side] have if they choose,” said John McLean, executive director of ISS ESG.
McLean said the ISS ESG Muni QualityScore was previously designed for the buy- and sell-side, but it has expanded its data offerings to issuers with datasets focused on their specific locations.
ISS ESG’s Muni QualityScore provides a detailed assessment of socioeconomic risks faced by upward of 29,000 U.S. cities/towns, 341 counties, 13,500 school districts and all 50 states, according to the firm. Revenue issuing entities such as hospitals, utilities, higher education and airports are also covered.
This approach offers issuers and investors data about risks related to infrastructure, crime, health, climate and other factors. Additionally, since issuers can identify the risks that need to be addressed or reduced, they can also use this data to make their intentions toward sustainable or green bond issuances clear, McLean said.
The ISS ESG Muni QualityScore data is calculated from 77 socioeconomic datasets and provides a material view of risk for the client when measured against its peers. Updates will be made every quarter, according to McLean.
“For issuers to go out and fulfill an ESG requirement or mandate, it’s going to cost them as they have to hire somebody," he said. It may take them a while to find the necessary data and also measure themselves against their peers, he said.
Whereas, using the ISS ESG Muni QualityScore data creates a commercial solution should ESG become a regulatory requirement or, more likely, the market expectation, McLean said.
“If you could build a commercial solution to what may become a regulatory requirement, most participants in the market are going to be very happy with it,” he said. “This is nonpolitical, this is non-interpretative — this is data.”
In sample reports, Wayne County, New York, received an ESG score of AA, while Harris County, Texas, got a C. The counties were evaluated on the same datasets, with each receiving a good, OK or bad designation based on its rank in the state and nationally.
For example, in the environmental section, Wayne County ranked high (or “good”) in climate change exposure to air quality, water quality, rising sea levels (coast) and heat index nationally, but climate change exposure to water quality and heat index was low (or “bad”) on a state-level. Conversely, Harris County was ranked poorly in all four both at a state level and nationally.
Moreover, the amount of data clients receive is almost double, as not all of the breakdowns of the data, such as race and gender of a health insurance dataset, are used to calculate the ESG score.
McLean said the information provided to issuers includes large amounts of data that they can talk about with their underwriters and buy-side clients.
“They can highlight that they're making improvements and show track records and why they're doing certain projects now,” he said.
“So if we licensed Wayne County, New York, if they want to show that to the buy-side or the dealers, they can do that,” he noted. “They're not reinventing it, but they can certainly provide that in different ways.”
Issuers are charged based on their population. Municipalities, counties, school districts, states and single location revenue sector issuers such as universities, hospitals and airports, are charged an annual license fee of $1,000 to $2,500 based on size. Multiple location revenue sector issuers, like gas districts, health systems and toll roads pay between $5,000 to $15,000 based on the number of locations of operations.
