Sectors with $4.3 trillion in debt face heightened environmental credit risk: Moody's Ratings report

Moody's Ratings has released a new environmental heat map amid COP29, which shows 16 sectors with $5.3 trillion in rated debt face increased environmental credit risk.

Sectors exposed to very highenvironmental credit risk account for 5.1 per cent of total rated debt, up from 3 per cent in 2015, at the time of the Paris Agreement's unveiling.

The new heat map report includes 90 sectors accounting for about $84 trillion in rated debt and explores their exposure to five different environmental risks.

Here are a few key findings

Sixteen sectors facing very high or high overall environmental credit risk account for $4.3 trillion in rated debt. Coal mining and coal terminals; chemicals; mining -metals and other materials excluding coal; independent exploration and production (E&P); integrated oil companies; and refining and marketing face very high environmental
credit risk.

Ten sectors face high environmental credit risk. These sectors account for 5.1 per cent of total rated debt, flat from 2023 but up from 4.2 per cent in 2020 and 3 per cent in 2015.

Sixteen sectors with $5.0 trillion in rated debt have very high or high inherent exposure to carbon transition risk. Integrated oil companies, independent E&P, refining and marketing, and coal mining and coal terminals have very high inherent exposure, while 12 sectors have high exposure, including regulated and self-regulated utilities with generation, unregulated utilities and power companies, chemicals, auto manufacturers, midstream energy and airlines.

Fourteen sectors with high inherent exposure to physical climate risks account for $6.2 trillion in rated debt. This still exceeds the amount of debt held by sectors with heightened exposure to any other environmental risk category. The largest sectors in terms of rated debt with high inherent exposure include emerging market sovereigns,
regulated and self-regulated utilities with generation and integrated oil companies.

Nine sectors with very high or high inherent exposure to water management risk account for $1.8 trillion in rated debt. Integrated oil companies, independent exploration and production (E&P), and water and wastewater utilities are among the largest sectors with heightened exposure.

Fourteen sectors with $4.5 trillion in rated debt have very high or high inherent exposure to waste and pollution risk. Chemicals, refining and marketing, and coal mining and coal terminals have very high exposure. Regulated and self-regulated utilities with generation and integrated oil companies have the largest exposure by debt.

Eight sectors with very high or high inherent exposure to natural capital risk hold $1.6 trillion in rated debt. Coal mining and coal terminals and mining - metals and other materials, excluding coal have very high exposure. Sectors with the largest exposure by debt are Integrated oil companies and independent E&P.