The Impact of Environmental Factors on Credit Ratings in Healthcare.

At their core, credit ratings are holistic assessments of relative credit risk, inclusive of both quantitative and qualitative factors. Environmental, social, and governance (ESG) considerations have always been implicitly incorporated in credit rating methodology as components of a hospital or health system's wider performance. More recently, however, ESG effects have been explicitly identified. While social and governance considerations are important to credit ratings, the impact of environmental factors on rating outcomes in the healthcare sector continues to expand exponentially. This movement reflects the varied ways in which climate change, resource and materials management, energy management, and water management can affect credit profiles. The shift to a lower carbon-dependent economy also presents opportunities for issuers that make meaningful transitions toward renewable energy sources.