Corporate Carbon Risks Go Well Beyond Regulated Liabilities

Overview

• Over the next five years, carbon emissions regulation will extend to cover 40% of global greenhouse gas emissions, from 21% currently.
  
• In our view, focusing solely on a company's direct liability to regulation may not accurately reflect its full carbon price risk.
  
• We believe that a comprehensive analysis of carbon price risk should incorporate both direct and indirect exposure due to the cost of a carbon liability being passed down the supply chain or changing end demand for products and services.
  
• We have analyzed the impact of carbon pricing on corporate credit from four risk aspects: environmental regulations, emissions market pricing, business risk across the value chain, and financial risk on profitability, cash flow, and asset and liability valuation.
  
• Carbon price risk management strategies that companies have adopted are also helpful in evaluating the net impact of carbon price risk on corporate creditworthiness.

See full Press Release: https://www.globalcreditportal.com/ratingsdirect/renderArticle.do?articleId=1320771&SctArtId=238565&from=CM&nsl_code=LIME&sourceObjectId=8611570&sourceRevId=1&fee_ind=N&exp_date=20240521-15:28:18