For a bond to be issued, the credit worthiness of the issuer needs to be rated. Just three agencies dominate this business - S&P, Moody’s and Fitch. They tell potential investors how risky a bond is. The lower they deem the risk, the cheaper and easier it becomes for companies to secure debt.
Though they claim these ratings are independent, they are paid handsomely by the very same companies they rate. Despite the obvious risks - both environmental and financial - from investing in fossil fuel projects, all three agencies stress that they will not downgrade the ratings of firms with strong balance sheets based on environmental, social and governance (ESG) issues alone. It’s unsurprising, given that fossil fuel companies make up a quarter of non-financial corporate bond ratings.