Over $4 trillion in debt from 16 sectors is highly or very highly exposed to environmental risk – more than double the amount from 2015 when the Paris Agreement was signed...
This is according to a new interactive data story from Moody’s Investors Service.
As COP 28 kicks-off this week, Moody’s Investors Service delves into 90 sectors accounting for $82 trillion in debt in our rated universe, exploring the potential credit impacts from five major environmental pressures.
Key takeaways include:
- While coal mining was the only sector that faced very high overall environmental credit risk in 2020, today, there are five more – chemicals, mining (excluding coal), and three oil and gas sectors.
- 14 sectors holding $6.1 trillion in rated debt have high inherent physical climate exposure, including to risks such as rising sea levels, wildfires, water stress, extreme heat, increased frequency and severity of hurricanes, etc.
- $4.9 trillion in rated debt held by 16 sectors has high or very high inherent carbon transition risk exposure. For example, 19 of 23 global automakers Moody’s rates are facing high or very high exposure as tighter emissions standards necessitate substantial investments in carbon-reducing technologies.
- Rated debt held by 14 sectors with high or very high inherent exposure to waste and pollution risk totals $4.4 trillion. Industries such as chemicals, exploring/drilling for oil, mining for minerals/metals, and packaging manufacturing are confronting growing demands to reduce the volume of pollutants and waste their operations generate.
- Water management looms large for companies and governments, with risk exposure high or very high for 9 sectors holding $1.8 trillion in rated debt. For most Middle East and North African (MENA) countries, freshwater withdrawals significantly exceed renewable supply – and water is scarce even if alternative and nonrenewable water resources are included.
- $1.6 trillion in rated debt is held by 8 sectors with high or very high inherent exposure to natural capital risk, such as Brazil’s agricultural industries, which are seeing increased scrutiny of ties to deforestation, leading to higher operational, compliance, and monitoring costs.
