Our view is that materiality matters and what is material to E, S and G is best defined at the sub-sector level.
Kestrel Analysis and Scores reveal if bond-financed activities are aligned with sector-specific best practices to address greenhouse gas emissions, and the presence or absence of other beneficial sustainability attributes tied to impact and long-term credit performance.
We follow a robust and transparent methodology informed by the following primary sources:
The United States of America nationally determined contribution (NDC) in line with Article 4 of the Paris Agreement1
Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report2
Project Drawdown Framework for Climate Solutions
United Nations Sustainable Development Goals
United Nations Environment Program Finance Initiative
Financial Stability Board’s Task-Force on Climate-related
Science-based Targets Initiative
International Capital Market Association (ICMA) Green Bond
Principles and Social Bond Principles
Climate Bonds Initiative Standard and Certification Scheme
EU Taxonomy for Sustainable Activities
EU Biodiversity Strategy 2030
Envision sustainable design protocols established by the American Society of Civil Engineers and the Institute for Sustainable
Infrastructure at Harvard University
Our methodology is grounded in science-based international standards, summarized in our Sustainable Finance Principles.
In every sector, there are immediate ways to decarbonize and best practices to reduce greenhouse gas emissions. Kestrel reveals the presence or absence of these best practices which indicate if investments are transition-aligned.
Infrastructure should be designed for resilience to diverse physical risks. Energy-efficient buildings are key to a low-carbon future.
The UN has declared a biodiversity state of emergency. Depletion and lack of stewardship of water, soil, air, plants, and animals is widespread and intimately linked to the changing climate. Ecosystem services, food security, human health, and community well-being all hinge on sound and restorative management of natural resources.
Inequalities are present in many forms in the US and will continue to incite hardships and division without comprehensive changes to policies and attention to equity when prioritizing activities for financing. A more equitable society is a prerequisite for a well-functioning and sustainable economy.
Transparency ensures accountability to constituents and investors alike. Without adequate disclosure regarding financed activities, it is impossible to collaboratively overcome society’s most pressing challenges.
Kestrel evaluates the environmental and social characteristics of bond-financed activities for alignment with the five Sustainable Finance Principles. Our research includes: a review of the offering documents, reviews of publicly available information from the issuer and other reputable sources, and our own independent research.
Our evaluation framework is built around the concept of materiality. The material factors we consider are a result of deep understandings we’ve formed from over 20+ years of consulting with state and local governments on sustainable infrastructure and best practices to achieve multiple benefits, including social equity. Our methodology reflects the understanding that the best practices for positive environmental and social impact can vary greatly depending on the sector and sub-sector.
We use a sector-specific evaluation path to assess bond-financed activities on each Series. For E and S Impact Scores, 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.
The G score reflects the issuer’s transparency and disclosure when it comes to the bond-financed activities. Because the G score represents the availability and quality of relevant information about the bond-financed activities, it also reflects Kestrel’s degree of confidence on the E score and S score.
Kestrel Sustainability Intelligence is 100% original and independently developed, built on Kestrel’s foundation as the market leader for external reviews and authority on Green and Social Bonds in US public finance. Our data is backed by the quality and integrity we have brought to our advisory clients for more than 20 years.
Please contact us for our complete Methodology and Sector Materiality Guides (available to subscribers).
Integrity is a core value of our company, and we strive for excellence. We adhere to a comprehensive set of best practices designed to remove bias, ensure checks and balances, and provide assurance in our Sustainability Intelligence. Our analysts follow strict procedures, guided by our proprietary software to ensure a consistent approach to scoring. Our robust quality assurance and quality control procedures employ both automated methods within our software as well as experienced auditors and committee reviews to ensure data integrity.
Sector Materiality Guides
Our Sector Materiality Guides are developed by incorporating real-world best practices in sustainability, social equity and climate-action. These Guides are grouped into categories and align with our five overarching Sustainable Finance Principles which underscore Kestrel’s evaluation approach to communicate what’s material in bond-financed activities.
Criteria below are available to data subscribers. Please contact us for a demo or to start a conversation.
Airports Power Sector
Public Transit Drinking Water