ESG Seldom a Key Rating Driver in 2Q20 ESG factors were rarely a driver of rating changes in 2Q20, with widespread negative rating actions predominantly caused by liquidity issues and rising leverage as a result of the pandemic. Financial pressures have exacerbated governance weaknesses in some cases, particularly in the most affected sectors such as retail and energy. Long-Term ESG Trends Persist Falls in global carbon dioxide (CO2) emissions have started to reverse as some economies begin to recover. However, many of the structural trends increasing the relevance of ESG to credit ratings remain intact and in some cases are accelerating. Policymakers continue to launch initiatives aimed at supporting sustainable finance and managing climate risk, with some governments attempting to use fiscal recovery packages to make progress on low-carbon transition goals. The role of ESG in financial markets continues to grow, with new sustainable funds launching at a record pace in 2020 so far. COVID Bonds Reveal Agility and Challenges of Sustainable Finance System The rapid development of the “COVID bond” market, with USD236 billion of issuance globally within five months, demonstrates how sustainable finance infrastructure can direct capital towards new and shifting environmental and social objectives.