Investment-grade corporates face the risk of climate-related downgrades.
According to Fitch Ratings, more than half of global corporates that may be exposed to a climate-related downgrade of one or more notches by 2035 have investment grade ratings.
This is based on the first batch of published Climate Vulnerability Signals (Climate.VS) for about 715 corporates across all sectors and regions, the credit rating agency said.
“We have identified about 160 corporates, around 22% of the batch, that have Climate.VS of 45 or above in 2035, which we consider “elevated”, indicating material risk of a negative rating action in or before that year, unless the vulnerabilities are mitigated,” Fitch pointed out.
About 56% of the corporates with elevated Climate.VS are investment-grade corporates, the firm noted.
The proportion of companies potentially subject to a multi-notch downgrade (Climate.VS of 65 and above) is relatively low in 2035, at 2.5%, but rises to 17% by 2050, the firm added.
More than a half of all issuers with elevated Climate.VS are exposed to oil and gas, including oil and gas producers, pipelines and other energy midstream companies, according to Fitch.
Their climate vulnerabilities are driven by tightening emission requirements, Fitch observed, adding that the second-largest cohort is exposed to coal operations, including utilities with coal-fired plants, mining companies and blast-furnace steelmakers.
Building materials and industrial companies will also face rising climate risks due to increasingly stringent regulation, the firm said.