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Document C2019/057/13

Call for proposals — The European Investment Bank Institute proposes a new EIBURS sponsorship under its Knowledge Programme

OJ C 57, 13.2.2019, p. 24–26 (BG, ES, CS, DA, DE, ET, EL, EN, FR, HR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV)



Official Journal of the European Union

C 57/24

Call for proposals

The European Investment Bank Institute proposes a new EIBURS sponsorship under its Knowledge Programme

(2019/C 57/13)

The Knowledge Programme of the European Investment Bank Institute channels its research grants through different schemes, one of which is:

EIBURS, the EIB University Research Sponsorship Programme

EIBURS provides grants to university departments or research centres associated with universities in the EU, candidate or potential candidate countries working on research topics of major interest to the Bank. EIBURS sponsorships — of up to EUR 100 000 per year for a period of three years — are awarded through a competitive process to interested university departments or research centres with recognised expertise in the selected area. Successful proposals entail the delivery of a variety of outputs that will be the subject of a contractual agreement with the European Investment Bank.

For the academic year 2019/2020, the EIBURS programme is seeking proposals on a new research theme:

‘Incorporating Environmental, Social and Governance (ESG) Criteria in Credit Analysis and Ratings’

1.   Focus of the Project

The focus of this research is to develop a formal methodology, backed by rigorous academic research, for incorporating environmental, social and governance (ESG) criteria into credit analysis and ratings.

There is a clear trend in the asset allocation world to integrate sustainability criteria across investment portfolios. Seven of the top ten asset owners are integrating sustainability across all assets, while sustainable investment assets in Europe, the US and Canada grew from USD 13 trillion in 2012 to USD 23 trillion in 2016. In a recent ESG conference organised by Moody's, most issuers and investors considered the introduction of ESG factors as ‘a permanent change’ in the investment world, while roughly one third considered it ‘something to become more prevalent in 3 to 5 years’ — no votes were given to the alternative ‘ESG has no relevance’ response. In the same poll, 80 % considered ‘quantifying and modelling’ as the greatest difficulty in including ESG in credit analysis.

Moreover, the Principles for Responsible Investment (PRI), an international network of investors, published a ‘Statement on ESG in credit ratings’ in May 2016. This statement, supported by over 135 investors with over USD 27 trillion of assets under management and 17 credit rating agencies (CRAs), recognised that ESG factors can affect borrowers' cash flows and the likelihood that they will default on their debt obligations and are, therefore, important elements in assessing the creditworthiness of borrowers by CRAs. To reply to that call, for example, the two largest CRAs (Moody's and S&P) have recently published reports on how they are including ESG factors in their rating methodologies.

On the regulatory side, on 24 May 2018, the European Commission (EC) confirmed the first four legislative proposals under the its Action Plan for Sustainable Finance, covering benchmarks, green definitions, investor duties and retail investing. On ESG, the EC plans to introduce disclosure obligations on how institutional investors and asset managers integrate ESG factors into their risk processes.

Moreover, the EC explicitly mentions an ‘engagement with all relevant stakeholders to explore ways to integrate sustainability factors into the assessment of credit rating agencies’ and ‘the possible emergence of new credit rating agencies that would meet this objective’. The EC acknowledges that the focus of sustainability research providers on very large issuers has a negative impact on the attractiveness of smaller issuers for institutional investors and it welcomes solutions to preserve market access for smaller players.

The outcome of the methodology/final product should be shared publicly on the market.

2.   Proposed Action Plan

This project represents an open-ended research effort on a subject where little academic work has been developed. In this context, it is premature to provide detailed information about the methodological approach to be followed. In fact, one of the first outputs of the research efforts will consist in identifying a relevant research methodology. However, at this early stage, it is envisaged that the research should follow certain tasks in order to arrive at a workable methodology:


Analysis of the related literature: thorough and exhaustive search of the related academic and practitioner literature. ESG factors are widely believed to have an impact not only on firm value but also on credit ratings, even though, and as previously indicated, relatively little academic work is available on the subject.


Collecting the base data: collecting the data to be used to perform analysis of various models and approaches. Should include detailed data on credit risk as well as ESG and climate risk criteria across sectors and geographical locations. One key aspect of this project is the data accuracy and quality, and in particular the ability to rely on a sufficiently long sample of historical data.


Analysing the data: while the main focus of the research should be to understand the impact of ESG factors in credit ratings, an analysis of the impact of credit returns should be also included as part of the research project. As part of this effort, the assessment of the relative importance of the three factors, E for Environmental, S for Social, and G for Governance should be performed, for both the individual stock and the sector level.


Testing and calibration of structural credit risk models: design a methodology that would allow for formal integration of ESG factors into credit ratings. Analyse the relationship between ESG factors and credit risk priced by financial markets, and explore the implications in terms of credit rating and analysis methodology. An effort should be dedicated to the proper fine-tuning and calibration of the models so as to ensure that they are suited not only for the analysis of the usual macro and micro financial risk factors, but also of non-financial risk factors.


Scenario analysis: the previous analysis should provide an ex-post perspective on the impact of ESG factors on credit risk, but it does not have the ability to inform decision makers on the expected impact of extreme events or scenarios (e.g. climate scenarios) on a forward-looking basis. In this context, scenario analysis is expected to be of relevance in completing the measurement effort for the impact of ESG factors on credit ratings from an ex-ante perspective.


Robustness checks: a number of robustness checks should be performed, including performing a sort on credit ratings to try to show whether securities with low ESG scores generally show more subsequent return volatility than securities of the same rating with high ESG scores. A thorough analysis to assess whether the introduction of additional quantitative indicators from steps 4 and 5 should help explain away the cross-sectional differences in return volatility that are not explained solely by differences in credit ratings.


Design of a formal methodology for the integration of ESG factors in credit ratings: on the basis of the research work conducted, a comprehensive methodology for the integration of ESG factors into credit ratings is expected to be proposed.

To the EIB's knowledge, the development of an integrated rating methodology encompassing ESG criteria does not yet exist. The research project should therefore help develop this methodology with a specific focus on its applicability for smaller types of issuers in order to align it with the EC's request to preserve market access for smaller players.

Proposals should be submitted in English by 15 April 2019 24:00 (CET). Proposals submitted after this date will not be considered. Proposals should be sent by email to:

For more exhaustive information on the EIBURS selection process and on the EIB Institute, please visit: