Below are some of the questions we often hear from clients. Don’t see your question listed? Contact us — we’re happy to help!
Kestrel provides Sustainability Analysis and Scores and verification services designed to bring greater transparency and insight to fixed income, helping to set the market standard for sustainable finance.
We are a team of environmental and social scientists, engineers, and finance professionals with deep, nuanced understandings of how state and local governments finance and deliver public projects. We understand the complex activities and infrastructure financed with municipal bonds and provide meaningful, material insights on their sustainability and resilience characteristics with our innovative data offering.
We are also a leading provider of external reviews for green, social and sustainability bond transactions in US public finance, consistently garnering over 60% of the market share. We are qualified to evaluate corporate and municipal bonds in all asset classes worldwide for conformance with international green and social bond standards.
Kestrel Sustainability Analysis and Scores is a benchmark for the municipal market, providing original analysis and transparency on sustainability and resilience characteristics of financed activities. Scores are on a 1 to 5 scale, and a scoring rationale is provided. Additional data fields convey alignment with UN SDG Targets, green or social bond eligibility, and other relevant data.
Kestrel Sustainability Analysis and Scores provide a comprehensive assessment of sustainability, impact and resilience associated with individual municipal bonds. With qualitative and quantitative data fields, Kestrel Analysis and Scores include:
Kestrel Sustainability Analysis and Scores is a global offering useful for all buy-side and sell-side fixed-income market participants. This includes asset owners, asset managers, other investors, banks and other financial institutions. Our independent, science-based assessments are also valuable to educational institutions, foundations, researchers and governmental agencies.
Kestrel’s Sustainability Analysis and Scores is a versatile offering. Possible uses include:
Our data is available by subscription. Please contact us to discuss your goals, learn more about licensing, and schedule a demo.
Data is delivered via a direct API, through your Bloomberg terminal or through Investortools. Customized data-delivery solutions are also available. Please contact us to discuss.
Yes. Collaborating with market participants is a fundamental component of our firm’s mission.
We work at the series level (i) evaluating the use of proceeds, (ii) identifying the sustainability attributes and environmental and social impact of bond-financed activities, (iii) highlighting resilience features where they exist, and (iv) determining the degree to which the issuer has made this information readily available.
We follow a robust evaluation methodology to evaluate project impacts and key project details against industry standards, assessing each individual bond at the series level.
Our analysts, who are environmental or social scientists, are well-trained to follow a robust scoring methodology that includes sector-specific evaluation criteria. These criteria reflect operationally feasible best practices in sustainability, social equity and climate-action. These criteria are called “material factors” because they parse out the key aspects of bond-financed activities that truly drive impact in each specific sector.
Each sector or sub-sector has a baseline score which increases or decreases based on the presence of positive or negative material factors, respectively. Positive material factors represent sector-specific best practices. Frequently these best practices are also risk mitigants.
When it comes to evaluating environmental and social impacts, materiality varies greatly by sector and sub-sector. For example, think how different best practices could be between a landfill and a school, or a power utility and an airport. Kestrel has methodologies to identify specific material factors in over 160 sub-sectors. These guide us to look for the operationally feasible best practices that have the most potential for positive impact in each sub-sector.
Yes. Our methodology is flexible and scalable, supporting multi-sector and/or multi-industry scoring.
We strive to be transparent with our evaluation approach. The sector-specific material factors we identify are grouped into categories such as “Renewable Energy” or “Ecosystem Restoration” and are presented in our data. These categories align with five overarching Sustainable Finance Principles which are the foundation of Kestrel’s Sustainability Analysis and Scores.
The five Sustainable Finance Principles we have defined are:
For more information on our approach, see our methodology FAQs in the next section or contact us to request our comprehensive scoring methodology document which includes a list of categories.
Kestrel Sustainability Analysis and Scores include separate environmental, social and governance (transparency) scores as well as a Composite Score for each bond. Each score is on a scale of 1 to 5, with 1 being a low score and 5 being a high score.
The Composite Score is a weighted average of the E, S and G scores for each bond. This weighted score puts the sustainability characteristics in a broader market context, allowing for comparison within and across sectors. For example, it is possible to compare school bonds to hospital bonds.
Weighting is assigned based on where the sector has the greatest opportunity for impact, and is founded in academic research and industry knowledge. For example, since the transportation sector contributes more than 25% of all US greenhouse gas emissions, and a sustainable future requires decarbonization of our transportation system, Kestrel weighs the environmental score for transportation bonds more heavily than the social score. Similarly, the primary benefit of a K-12 school is the opportunity for education, so the S score is weighted more heavily.
Weighting does not inherently prioritize certain sectors.
We use UN SDG Targets to provide additional insights and transparency about the sustainable benefits of the uses of proceeds, and we apply a consistent approach to assigning these based on the financed activities.
The UN SDGs include 17 broad Goals for sustainable development, and each Goal has underlying sub-goals or “Targets” (totaling 169) that describe more detailed actions necessary to achieve a particular Goal. For example, UN SDG Goal 4 “Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all” has ten Targets.
We identify the source of funds for payment of principal and interest on each bond. These sources are also characterized as “Generally Acceptable” or “Possible Flashpoints.” If a source of repayment is potentially controversial, we provide this information for investors. This has no impact on scoring, and it is left to individual investors to decide if they want to act on this information.
A few examples of “possible flashpoints” in sources of repayment include revenues from: mining, tobacco, casinos, petroleum refining and oil and gas royalties.
Yes! Please contact us.
Integrity is a core value of the company. Analysts follow strict procedures, guided by automated methods in our proprietary software to ensure consistent analysis. This approach is designed to remove bias, and ensure quality, accuracy and consistency in the outputs. We use both human- and software-driven quality assurance procedures.
Green or social bond eligibility does not affect the score. Kestrel Sustainability Scores are based on our assessment of sustainability attributes and resilience, whereas green or social bond eligibility is based on alignment with internationally accepted standards. Bonds may have high E or S scores and may not be eligible for green, social, or sustainability bond designations, and vice versa.
Kestrel analysts evaluate bond-financed activities for sector-specific best practices for sustainability.
The best practices are grouped into categories such as “Renewable Energy,” “Low Carbon Buildings” or “Ecosystem Restoration.” These align with the five Sustainable Finance Principles which are foundational to Kestrel’s evaluation approach:
Anyone who subscribes to Kestrel data can see the Analysis and Scores on all bonds we cover.
No. Kestrel Sustainability Analysis and Scores is a subscription-based product available for market participants from both the buy-side and sell- side to purchase for a variety of uses.
A Second Party Opinion from Kestrel is a concise report that summarizes our holistic evaluation of how a bond aligns with internationally accepted green, social, and sustainability bond standards.
Kestrel Sustainability Scores are based on sector-specific methodologies for evaluating bond-financed activities for sustainability attributes and resilience features.
No. Bonds with Second Party Opinions are evaluated using the same methodology as bonds without Second Party Opinions.
Kestrel only provides Second Party Opinions on eligible bonds, and we have certain minimum thresholds for impact. We don’t provide negative Opinions. In general, we expect bonds with Second Party Opinions from Kestrel to have positive environmental or social impacts as well as some extra transparency around uses of proceeds. Thus, they may have higher E, S or Transparency scores. But, the scores are not necessarily higher because an Second Party Opinion is present.
To evaluate bonds, Kestrel uses a variety of information that is publicly available at the time of review. If you think we have overlooked something important, please let us know.
For more general information about what kinds of activities can improve scores in each sector, please see our Sector Criteria.