Sector exposure to low-carbon transition risks – Finch, a credit rating agency has announced the publication of climate vulnerability scores for several new sectors, including auto manufacturing, aerospace and defence, transportation and technology, media and telecommunications, and a few more sectors.
The Initial launch was for the utilities, oil and gas, and chemicals sectors.
The credit agency’s climate vulnerability score will impact the creditworthiness of the companies and debt securities to a rapid low-carbon transition in the next 25 years.
The scores are developed in response to the investors’ need for a long-term view of transition risks and recognize the implications of instruments of different maturities and strategies for portfolio management, monitoring, and reporting.
There is increasing pressure from multiple stakeholders like investors and public markets to take action.
The new scores are pulled out on the UN Principles for Responsible Investment Inevitable Policy Response Forecast Policy Scenario (IPR FPS), which predicts the high need for immediate climate policy actions in the next three years.
The IPR FPS forecasts higher ambition across carbon pricing, coal phase-out, 100% clean power, zero emission vehicles, low-carbon buildings, clean industry, low-emissions agriculture, and forestry – the eight key policy levers. The IPR provides a range of investor applications based on high-conviction policy, a fully integrated climate scenario, and required policy scenarios.
The airline sector of the transportation has been reported as the most exposed for high transition and score ranges, followed by shipping and rail. Hence Fitch ratings have offered the scores without subscription for the transportation sector, and otherwise, the scores are available on a subscription basis on the website.
The vulnerability scores will help investors look at the long-term implications of climate related risks on their lending portfolios and manage their risks.
Climate risk is investment risk. Data and analytics are powerful approaches to constructing informed investment decisions, so the credit structure requires being highly proficient and welcoming frequent updates or revisions to stay intact. The scores help a business look at the most significant threats from climate change, understand the operation, benchmark the data and align with the standards.
