faqs / sustainability analysis and scores

frequently asked questions

Below are some of the questions we often hear from clients. Don’t see your question listed? Contact us — we’re happy to help!

general

Who is Kestrel?

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.

What are Kestrel Sustainability Analysis and Scores?

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.

What’s included?

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:

  • Four numeric scores, each on a scale of 1-5, where high scores reflect exemplary bonds with positive impacts and presence of risk mitigants:
  • Environmental (E)
  • Social (S)
  • Governance (Transparency) (G)
  • Composite Score
  • Sustainability Themes, which identify the key drivers of each numeric score
  • Use of Proceeds Analysis summarizing Kestrel findings, including key bond-financed activities and their material sustainability, impact and resilience attributes
  • Alignment with the 17 United Nations Sustainable Development Goals and 169 Targets
  • Sources of repayment are identified and classified as either “generally acceptable” or “possible flashpoint”
  • Eligible green, social or sustainability bonds are identified, including unlabeled bonds
  • Climate risk disclosure score, which assesses the adequacy of climate risk information provided in offering documents
  • Green building and sustainability certifications for financed activities

 

Who is Kestrel Sustainability Analysis and Scores for?

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.

How can Kestrel Sustainability Analysis and Scores be used?

Kestrel’s Sustainability Analysis and Scores is a versatile offering. Possible uses include:

  • Integration in Bond Trading – Identify bonds that meet sustainability criteria to support efficient buy/sell decisions in primary and secondary markets. Select securities based on alignment with the just transition to a decarbonized economy. Enhance exclusionary strategies.
  • Construct and Manage Portfolios – Use Kestrel Sustainability Analysis and Scores to construct fixed-income portfolios that include reductions in carbon emissions over time.
  • Thematic Investing – Identify bonds that qualify for specific themes, like Clean Energy, Access to Education, Affordable Housing or the Just Transition.
  • Identify unlabeled Green, Social and Sustainability bonds – Identify unlabeled but eligible bonds in the primary and secondary markets.
  • Compliance – Meet your net zero investing and social equity commitments. Show compliance with internal and external investment mandates.
  • Impact Reporting – Communicate the impacts of bond holdings with our use-of-proceeds-based UN SDG Goals and Target alignment. We include a narrative description of bond-financed activities and associated impact.

How does licensing work?

Our data is available by subscription. Please contact us to discuss your goals, learn more about licensing, and schedule a demo.

How is data delivered?

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.

Does Kestrel offer customized data solutions?

Yes. Collaborating with market participants is a fundamental component of our firm’s mission.

Let’s start a conversation.

our approach

What’s unique about Kestrel scoring?

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.

 

How does Kestrel evaluate bonds?

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.

Why sectors and sub-sectors?

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.

Does your methodology support bonds that cross multiple sectors?

Yes. Our methodology is flexible and scalable, supporting multi-sector and/or multi-industry scoring.

How does Kestrel provide transparency on its own methods?

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:

  1. Transition to a decarbonized economy
  2. Integrate resilient and sustainable design features
  3. Preserve, enhance, or restore natural capital
  4. Promote a more equitable society and a just transition
  5. Disclose activities, impacts and risks

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.

data methodology

Understanding Kestrel Sustainability Analysis and Scores

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.

  • A bond’s environmental score (E score) reflects the presence or absence of material factors that advance three of Kestrel’s Sustainable Finance Principles: 1) transition to a decarbonized economy; 2) integrate resilient and sustainable design features; and 3) preserve, enhance, or restore natural capital. Industry-accepted best practices have been identified to advance these Sustainable Finance Principles within each sub-sector. Bonds with high environmental scores finance activities that directly or indirectly reduce greenhouse gas emissions, incorporate sustainable design features, and/or incorporate nature-based solutions as appropriate for that sub-sector.
  • A bond’s social score (S score) reflects the presence or absence of material factors that indicate alignment with the Principle of promoting a more equitable society and a just transition. Sector-specific best practices that foster improved access to essential services, affordable housing, food security, and/or socioeconomic empowerment are used in the evaluation. In assessing the social benefit characteristics, the primary purpose of the bond-financed activity or program as well as the population it serves is considered.
  • A bond’s governance (transparency) score (G score) is a reflection of the transparency and disclosure regarding the bond-financed activities. The degree to which the issuer has made information about bond-financed activities readily available is assessed. Best practices that are considered include: clearly defined project sector(s), project location(s), purpose, rationale, and budget. We sometimes refer to this as a Transparency Score.

What is the Composite 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.

How does Kestrel assign UN Sustainable Development Goals (SDGs) and Targets?

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.

What are "possible flashpoints"?

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.

Is more information about Kestrel's methodology available?

Yes! Please contact us.

quality control and assurance

How does Kestrel ensure data integrity and quality?

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.

How much does green or social bond eligibility drive scoring?

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.

issuers

How do I know what goes in the score?

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:

  1. Transition to a decarbonized economy
  2. Integrate resilient and sustainable design features
  3. Preserve, enhance, or restore natural capital
  4. Promote a more equitable society and a just transition
  5. Disclose activities, impacts and risks

Who sees my score?

Anyone who subscribes to Kestrel data can see the Analysis and Scores on all bonds we cover.

Do I have to pay for a score?

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.

What is the difference between Kestrel's Sustainability Analysis and Scores and a Second Party Opinion?

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.

Will my score be higher if I have a Second Party Opinion from Kestrel?

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.

Can I improve my score?

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.