Since Paris, climate-affected debt doubled: Moody’s

Since the Paris Agreement on climate change in November 2015, the amount of debt that’s exposed to heightened environmental risk has doubled, according to Moody’s Investors Service.

In a new report, the rating agency said that US$4.3 trillion in rated debt is now held by sectors that face elevated environmental risk, representing 5.1% of total debt — up from 3% in 2015.

Moody’s reported that the total debt held by sectors facing high or very high environmental risk has increased by 109% since 2015, and is up 27% from December 2020, when its previous in-depth analysis was published.

The number of sectors facing high risk has also expanded to 16 from just nine sectors in November 2015.

The rating agency’s analysis found that 16 sectors are facing transition risks. There are 14 sectors with high physical climate change risk and pollution risk, while nine sectors are contending with natural capital risk and eight sectors have water management risks.

“Debt held by sectors exposed to heightened environmental credit risks is rising as a share of our total rated debt universe, indicating that environmental considerations are increasingly pressuring issuers’ credit profiles and will continue to do so,” said Ram Sri-Saravanapavaan, vice-president and senior analyst at Moody’s, in a release.

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