This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.
Turn to the nation's most objective and informative daily environmental news resource to learn how the United States and key players around the world are responding to the environmental...
May 5 — Standard & Poor’s Ratings Services says it will take a closer look at how banks, insurers and asset managers are preparing for the impacts of climate change.
The ratings agency has come up with a set of indicators that it will use to identify who in the financial sector is likely to be hardest hit by climate change and which companies are more likely to gain from the shift to a low-carbon economy by getting involved in green finance and investing or otherwise beefing up their green credentials.
“We expect that, over time, climate change may have the potential to materially affect the credit profiles of some financial services companies,” S&P analysts wrote in a report released May 4.
The report said climate risks to the industry could manifest in different ways—through bad loans, devalued fossil fuel assets or more frequent claims on insurance. Regulatory pressure, reputational concerns and possible legal challenges from activists could pose even greater threats than the direct costs of climate change, it said.
S&P has already examined climate risks to sovereign and, more recently, corporate credit profiles.
“At the end of last year, we did a lookback over the previous two years of all our global rating actions to see how much climate risk and environment risk has actually impacted credit ratings,” Michael Wilkins, S&P's global head of environmental and climate risk research and one of the authors of the report, said May 4 at an event hosted by Bloomberg.
The ratings agency identified about 300 examples where those risks had a material impact on corporate credit analysis and almost 60 cases where it led to rating actions, most of which were downgrades.
“We expect that to increase over time,” Wilkins said.
Climate risks to the global economy are being talked about more often, including among financial regulators. But S&P’s report said “it remains difficult to quantify the potential impact” based on current disclosures, which tend to use boilerplate language and focus more on carbon emissions than wider climate impacts.
A task force set up at the end of last year by the Financial Stability Board, an adviser to the Group of 20 nations, is looking to improve climate-related financial disclosures with a set of voluntary guidelines due out at the end of this year.
Michael Bloomberg, founder and majority owner of BNA’s parent company Bloomberg LP, chairs the panel. Wilkins is also a member.
To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com
To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com
The S&P report, “Climate Change-Related Legal And Regulatory Threats Should Spur Financial Service Providers To Action,” is available at http://src.bna.com/eHV.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)