The power of ratings

18th August 2011 Posted by

The shock waves are still reverberating around the financial markets following Standard & Poor’s financial downgrading of the US, which saw billions wiped off the stock values of companies in the US before spilling over into the Eurozone with equally devastating effects. In the aftermath, one can reflect that if a similar downgrading occurred in one of the many sustainability indexes, would we have registered a similar meltdown?

For the major companies who invest considerable time and money in reporting and improving their sustainability credentials, the commercial advantage gained vis a vis their competitors is still questionable.

I wonder what the reaction could be if the financial ratings agencies closely aligned the sustainability credentials of companies or countries to the financial ones?

Imagine the sharp focusing of the mind for those running companies or countries if they knew that to maintain a positive financial rating their sustainability goals would need to be achieved and continually improved.

Let’s hope that Standard & Poor and Moody’s start to see the intrinsic link between the financial strength and sustainability. If they started to rate in sustainability terms, imagine what would happen to the business models of companies and various countries’ abilities to consume the earth’s resources at the pace they do.

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