The role of credit rating agencies. Credit rating agencies play a significant role in the credit analysis space, so it's really important to be clear about what credit rating agencies do and what they don't do. They measure the relative probability of default of a bond or its issuer. They give opinions based on a mix of qualitative and quantitative considerations, and they are regulated. They do not provide ESG scores as ESG rating agencies do As ESG scores purely focus on the issuer's exposure to and management of ESG risks. Credit ratings are not a form of advice to buy, sell, or hold an asset. They are not measures of liquidity or price and they are not an audit of the company. The key objective of the rating is to provide metrics for evaluating the relative creditworthiness of issuers and obligations. Credit rating agencies focus on material impacts, financial, regulatory, and legal factors that could affect the company's credit profile. They assess the predictability and certainty of an issuer's ability to generate future cashflow to meet its debt obligations. And part of this assessment is the consideration of whether the companies can sell their assets to cover obligations. Credit rating agencies look at a range of ESG factors and judge their materiality. They judge the company's response to ESG risks and potential ESG events. They do so to understand the potential financial and balance sheet or cash considerations that could impact the company's ability to meet the debt obligations. An important aspect of the whole process is the assessment of the level of litigation risk stemming from environmental and employment litigation, as well as human rights violations. They have been producing a range of research for their clients to understand and gain more transparency into how ESG factors are specifically incorporated into an issuer level credit assessment and any impact they may have on the ratings decision. The sector is dominated by three global companies: Standard & Poor's, Moody's and Fitch. So how do investors use the information provided by rating agencies? Well, investors use such information to trade and assess the credit risk of fixed income securities. Analysts and investors often use this information as an input or alongside their proprietary credit analysis models that incorporate other research, analysis and judgment to determine an opinion on the bonds yield or suitability for an investment portfolio. The credit rating given to an issuer also plays a role in determining which investors or entities can or cannot invest in such securities. The distinction between investment grade and sub-investment grade, for example, is relevant. The promised payments of investment grade bonds are perceived as less risky than those of sub-investment grade bonds because of a number of factors, such as profitability and liquidity considerations. Some regulated institutions, such as banks and life insurance companies may face limitations on holdings of sub-investment grade bonds. The investment policy statements of some investors may also include constraints or limits on such holdings.