Climate-driven downgrades face blue chips too

Over half of the companies in danger of facing a credit-rating downgrade due to climate-related risks currently carry investment-grade ratings, says Fitch Ratings in a new report.

The rating agency published a report that singles out 160 companies at “material risk” of a rating downgrade by 2035 because of climate vulnerabilities.

More than half of the issuers with elevated climate risks are in the oil and gas sector, including oil and gas producers, pipelines and midstream energy companies, Fitch said.

“Their climate vulnerabilities are driven by tightening emission requirements,” it said.

After the oil and gas sector, companies with coal exposures — including utilities with coal-fired plants, mining companies and blast-furnace steelmakers — are the second-largest segment of exposed issuers.

“Building materials and industrial companies will also face rising climate risks due to increasingly stringent regulation,” Fitch said.

Moreover, the rating agency said that over half (56%) of the firms facing potential climate-driven downgrades are investment grade companies.

The share of companies potentially exposed to a multi-notch downgrade due to climate exposures is just 2.5%, Fitch said, but that share rises to 17% by 2050.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.