Rising environmental and climate risks are likely to increase related credit rating actions in the coming years, according to S&P’s recent report in Environmental Finance. Looking back, the report reveals that, so far, the lion’s share of changes to ratings have occurred in the oil refining sector, regulated utilities, and unregulated power and gas subsectors.
However, other sectors, such as transportation, have also been heavily impacted, primarily by emissions policies. For example, we only need to look to the recent downgrade of Volkswagen (VW) following the recent emissions scandal, which saw more than 10,000 vehicles fitted with software designed to cheat certain emissions test. It is S&P’s view that VW will continue to face wide-ranging negative credit consequences in the near future.
The future could also usher in significantly “more devastating events than we’ve seen recently” said Mike Wilkins, lead author of the report. He goes on to examine the effect of extreme weather and natural catastrophes on direct property and production losses, as well as supply-chain and market disruptions.
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