ESM invests responsibly
ESM invest responsibly
To capture the ESG impact of its financial portfolio and remain in line with the values and principles of the EU and its own commitment to responsible investment, the ESM uses a holistic scoring approach compatible with its investment mandate:
- All paid-in capital assets except cash holdings are scored.
- Scores applied at issuer level for each asset held.
- Environmental, social, and governance get roughly equal weight.
- Scores are based on a broad range of indicators.
- Methodology captures EU priorities and principles, including UN-defined Sustainable Development Goals.
Using Moody’s Vigeo Eiris methodology, the ESM calculates scores of its year-end holdings per asset type and for the entire paid-in capital. The average ESG scores for ESM assets, along with its holdings of securities from supranational and sovereign issuers, are in Moody’s highest advanced category, while that for financial issuers is one grade lower at the robust category.
These scores help the ESM obtain an accurate picture of an issuer’s contribution to the overall ESG impact.
Given that the ESM is constrained to invest in only highly liquid instruments with prime credit ratings, these ESG scores are commendable. Scoring will show how ESG quality changes over time and help the ESM adapt the portfolio if needed.
