Moody’s Investors Service has announced that it will use countries’ carbon reduction commitments under the Paris Agreement to assess the credit risks companies face in the shift to a low-carbon economy.
“The near-universal adoption of the Paris Agreement substantially increases the likelihood of coordinated and effective policies to materially reduce carbon and other greenhouse gas emissions over time, which has in turn the potential to become a significant [credit] ratings driver in a broad set of industries,” said Moody’s Managing Director Brian Cahill.
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“Our baseline scenario is a forecast of the global emissions pathway if all countries were to implement their national contributions put forward as part of the Paris Agreement,” added Senior Vice President Ilya Serov. “While not sufficient to meet a less-than-2°C warming objective, this baseline represents a plausible central scenario, given the current policy commitments of national governments and technology trends.”
Moody’s identifies 13 industries that will face the greatest risk in the low-carbon transition, including three—coal, coal infrastructure, and unregulated power utilities—that already face “material credit impacts and rating adjustments,” the UNFCCC reports. The rating agency foresees four main categories of risk: policy and regulatory uncertainty over the pace and specifics of national emissions policies, declining profitability and cash flows, demand substitution and changes in consumer preferences, and the development of disruptive low-carbon technologies. (h/t to BusinessGreen for first pointing us to this story)
