Climate change growing in relevance - Moody's
JOHANNESBURG - Moody's Investors Service said yesterday that environmental, social and governance (ESG) issues were increasingly influencing credit quality assessments and investment decisions, it said in a round-up report, summarising key ESG trends recently published in 2020 Outlooks.
Ram Sri-Saravanapavaan, ESG Analyst at Moody’s, said, “One major trend is that climate change and the transition to a low-carbon economy are growing in relevance for global credit markets. Investors are seeking more disclosure from companies about how they are addressing these risks as the financial implications are becoming clearer,” he said.
Stricter climate policies would raise transition risk for the most exposed carbon-intensive sectors, including utilities, oil and gas, car manufacturing, airlines, building materials and shipping.
Rising concerns of future asset write-downs and reduced cash flow might raise companies’ cost of capital or reduce access to funding, impairing their ability to raise, service or refinance debt.
The report noted that public interest in preserving natural assets, such as land, water and living things, would increase significantly over the coming years. Matters such as water scarcity, biodiversity, land use, deforestation and food insecurity would put a spotlight on issuers’ management of resources.
Other trends included risks and opportunities created by ageing populations and socially driven regulation. “Ageing is already a big concern in advanced European economies and Japan, and will become a rising credit issue in emerging markets. Consumer activism and heightened focus on responsible production will encourage regulation of new categories,” it said.