State Of The Global Oil & Gas Markets | S&P Ratings

State Of The Global Oil & Gas Markets | S&P Ratings

Global Forum releases new compliance ratings on tax transparency for 10 jurisdictions

Global Forum releases new compliance ratings on tax transparency for 10 jurisdictions

Assessing The Credit-Supportiveness Of Europe's Renewable Energy Frameworks

The policy risk associated with renewable energy frameworks across the EU has never been more prominent. On May 12, 2014, the U.K.'s Department for Energy and Climate Change announced that it plans to close its support scheme for solar power projects generating more than 5 megawatts (MW) from April 1, 2015, two years earlier than originally planned. This followed German Chancellor Angela Merkel's announcement on March 17, 2014, of a cut in feed-in-tariffs (FiTs; pre-set prices for energy produced from different renewable resources) across all renewable energy sources and a scaling back of the country's ambitious clean energy program. Ms. Merkel plans to cut FiTs to €0.12 per kilowatt hour (kWh), on average, by 2015 from the current €0.17/kWh and proposes to limit the annual expansion of onshore wind and solar capacity to 2.5 gigawatts (GW) and offshore wind capacity to 6.5 GW.

Both announcements have fueled uncertainty among investors about the future of renewable energy incentives, despite rational explanations underpinning them. In the U.K., the government says it's cutting solar subsidies to ensure there is sufficient cash to support other types of renewable technology such as offshore wind, wave energy, biogas, and geothermal, and to limit further increases in consumers' bills. In Germany, the emphasis is on containing rising energy bills, which are the highest in Europe and about three times the level of those in the U.S. However, Standard & Poor's Ratings Services believes this uncertainty can deter investors and potentially limit the growth of renewable energy investment in the EU since market participants regard some clean energy technologies as commercially unviable without government support. Moreover, government incentives often underpin the financial viability of renewable energy projects: For instance, subsidies to solar power projects in Europe can account for up to 85% of their initial revenues. This, in our view, illustrates the importance of predictable, ongoing financial support for renewable energy projects, and highlights the credit risk associated with any changes to this support.

See full Press Release: https://www.globalcreditportal.com/ratingsdirect/renderArticle.do?articleId=1320763&SctArtId=238545&from=CM&nsl_code=LIME&sourceObjectId=8627256&sourceRevId=1&fee_ind=N&exp_date=20240521-15:19:26

Climate Policy And The Rise Of Carbon Markets

Overview

• The world's policy response to climate change has so far been fragmented, resulting in a mix of taxes, cap-and-trade programs, environmental legislation, incentives for renewable energy, and a host of other policies and measures at local and national level.
  
• The policy frameworks -- market-based or otherwise -- that are seen to work best over the next few years are likely to provide the blueprint for managing emissions for decades to come, raising implications for long-term investments in energy generation and industrial manufacturing.
  
• In Europe, the world's largest cap-and-trade market appears to be achieving its aim of limiting CO2 emissions at a comparatively low cost. However, the true cost to Europe's economy is unclear, given state subsidies for renewables and other incentives.

See full Press Release: https://www.globalcreditportal.com/ratingsdirect/renderArticle.do?articleId=1319868&SctArtId=238013&from=CM&nsl_code=LIME&sourceObjectId=8606293&sourceRevId=1&fee_ind=N&exp_date=20240519-19:12:26

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

Dealing With Disaster: How Companies Are Starting To Assess Their Climate Event Risks

Overview

• Extreme weather events were responsible for 90% of documented natural catastrophe loss events in 2013, causing $124.5 billion of overall losses out of the $135 billion total natural catastrophe losses.
  
• Worsening financial performance as a result of climate event risk can negatively impact both short-term liquidity and long-term debt financing positions, leading to an increase in credit risk.
  
• We think industry regulators and investors are likely to focus more closely on climate and carbon risks as an indicator of company performance and, for the latter, value.

See full Press Release: https://www.globalcreditportal.com/ratingsdirect/renderArticle.do?articleId=1320511&SctArtId=238387&from=CM&nsl_code=LIME&sourceObjectId=8616143&sourceRevId=2&fee_ind=N&exp_date=20240520-20:07:08

Nielsen, Net Impact and Ernst & Young to release research findings at International Corporate Citizenship Conference

Nielsen, Net Impact and Ernst & Young have chosen our 2012 International Corporate Citizenship Conference as the ideal environment to release findings that will influence the way global brands manage their relationship with key stakeholders.

Along with the Boston College Center’s own biennial State of Corporate Citizenship report, the research from Nielsen, Net Impact and Ernst & Young will be made public for the first time at the conference in Phoenix, March 25-27. These findings will offer valuable information on how corporate citizenship issues are perceived by corporate leaders, employees and consumers.

See full Article.

SEC finds 'apparent failures' at credit rating agencies

The Securities and Exchange Commission (SEC) has discovered "apparent failures" at 10 credit rating agencies.

It said it was concerned that the agencies - including Standard & Poor's (S&P) and Moody's - were not making timely and accurate disclosures or managing conflicts of interest.

The SEC said it expected the agencies to "address the concerns".

See full Article.

More Demand Will Drive Greater Quality and Transparency of Ratings

A question and answer with Wood Turner and Mike Bellamente of Climate Counts, one of the ratings profiled in SustainAbility’s Rate the Raters research series.

1) Looking at the Phase Four paper of Rate the Raters, what resonates most with you?

Now that corporate sustainability ratings have been around awhile, SustainAbility’s Rate the Raters project helps us gauge what the future holds. The phase four paper establishes that rating standards will require greater differentiation moving forward, and that raters will need to distance themselves from the overly saturated data compilation side of the business in order to remain competitive. We at Climate Counts certainly believe this to be true; indeed, if our goal is to point the business community in the direction of climate change awareness and leadership, it should be done with clarity and efficiency, not complexity and duplication.

See full Article.

Rate the Raters

Corporate sustainability ratings are going mainstream, but how they work in practice remains somewhat of a mystery. For phase three of Rate the Raters we conducted in-depth evaluations of 21 ratings, in an attempt to shed light on this important area. The 21 ratings we focused on were a representative sample of the 100+ ratings that we inventoried in phase two.

Our phase three work revealed numerous examples of good practice, which are detailed in our report. We are starting to see efforts to reduce the survey fatigue that companies face. A greater number of raters are soliciting feedback and direction from external experts, many through formal advisory panels. And we observe a few raters opening up their black boxes to let us in on their methodologies. Yet we found many areas in need of improvement as well, and offer a number of recommendations to raters for the future.

See full Article.

Five CSR Rankings Compared

CSR ranking confession: I tricked you! Or more accurately, I tricked myself. I recently asked you to guess the only company to be recognized by the 2009 Best Corporate Citizens, 2009 Most Ethical Companies, 2009 Newsweek Green Rankings (top 100 companies), 2010 Global 100 by Corporate Knights, and the 2010 Global ESG 100 by RiskMetrics Group. It turns out, however, that there is, in fact, NO COMPLETE CONSENSUS. Upon double-checking my work, I figured out that the one company that I had thought made all five lists was, in fact, not mentioned in the Most Ethical Citizens. My apologies to anybody I confused through my last post on this subject.

So without further ado, below please find the results of my (double-checked) analysis. While no company made all five lists, 11 were recognized by four of the five, an additional 24 by three, and yet another 87 by 2.

See full Article.

ASIC moves to compel ratings agencies to manage conflict of interest

THE regulatory wheels are slowly turning, with ASIC today unveiling the formal licensing rules for ratings agencies that require them to be registered and subject to an array of obligations.

Many of these would already be part of the agencies’ normal practice, but the key change is to formally register them and hold them to annual reviews.

In the aftermath of the financial crisis, rating agencies came under attack because triple-A rated paper was shown to be best suited for use in the toilet, yet billion-dollar investment decisions were made on the back of the advice.

The industry has a fundamental conflict in that the people who want the rating pay for it, so there is a potential inducement for the ratings agencies to write the advice to suit the client.

See full Article.

ASIC outlines improvements to regulation of credit rating agencies in Australia

From 1 January 2010, credit rating agencies will be required to hold an Australian Financial Services (AFS) licence. Under the AFS licensing regime, general licensee obligations set out in the Corporations Act will require credit rating agencies to:

o manage conflicts of interest that may arise in their businesses;
o have resources available (including financial, human and information technology resources) that are adequate for the nature, scale and complexity of their businesses;

See full Press Release.

Reforming the Ratings Agencies: Will the U.S. Follow Europe's Tougher Rules?

The financial crisis has provided an unexpected crash course on credit rating agencies, such as Moody's, Fitch and Standard & Poor's, which stamped triple-A ratings on a broad spectrum of subprime mortgage securities -- implying that they were nearly risk free -- then back-pedaled when the debt collapsed, taking with it the global economy.

In the United States, the resulting clamor for ratings agency reform led to a U.S. Securities and Exchange Commission (SEC) proposal that sought to mitigate conflicts of interest and enhance disclosures, require ratings firms to differentiate ratings for structured products, and nearly eliminate the role of ratings in SEC regulations. But the final rules the SEC adopted last December were far less stringent than the ones it had proposed six months earlier, in June.

Europe, on the other hand, became the world's most stringent regulator of ratings agencies when the European Union and the European parliament approved a package of ratings agency rules on April 23. The question now is whether the U.S. will follow Europe's lead and build on the new regulations, or go a different route.

See full Article.

Reforming the Ratings Agencies: Will the U.S. Follow Europe's Tougher Rules?

The financial crisis has provided an unexpected crash course on credit rating agencies, such as Moody's, Fitch and Standard & Poor's, which stamped triple-A ratings on a broad spectrum of subprime mortgage securities -- implying that they were nearly risk free -- then back-pedaled when the debt collapsed, taking with it the global economy.

In the United States, the resulting clamor for ratings agency reform led to a U.S. Securities and Exchange Commission (SEC) proposal that sought to mitigate conflicts of interest and enhance disclosures, require ratings firms to differentiate ratings for structured products, and nearly eliminate the role of ratings in SEC regulations. But the final rules the SEC adopted last December were far less stringent than the ones it had proposed six months earlier, in June.

Europe, on the other hand, became the world's most stringent regulator of ratings agencies when the European Union and the European parliament approved a package of ratings agency rules on April 23. The question now is whether the U.S. will follow Europe's lead and build on the new regulations, or go a different route.

See full Article.

La regulación de la industria de calificación se queda corta

El 3 de diciembre, la SEC (Comisión de Valores de EEUU) aprobó el endurecimiento de las reglas para las agencias de calificación de riesgo con la esperanza de que la supresión de los conflictos de interés impida que se produzcan las evaluaciones de calificación infladas que tanto han contribuido a la crisis de crédito. La SEC votó a favor de una mayor transparencia de las actividades de las agencias y por el fin de la calificación de riesgo de los títulos que ellas mismas ayudaron a los emisores a crear.

Aunque las agencias hayan elogiado la medida, hubo descontento entre los defensores de la reforma. Los cambios se han quedado lejos de las soluciones inicialmente propuestas por la SEC en junio y ratificadas en una declaración del 1 de diciembre (December 1 statement) por la Mesa Redonda de Economistas de Finanzas (FER, según sus siglas en inglés), un grupo de economistas de todo el mundo que lleva 15 años funcionando. Todos los años el grupo se reúne para tratar problemas relacionados con la economía. En opinión de la institución, al omitir dos elementos críticos de la propuesta, la SEC quitó poder a las normas.

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SEC Adopts New Rules for Credit-Rating Agencies

Federal regulators on Wednesday adopted new rules designed to stem conflicts of interest and provide more transparency for Wall Street's credit-rating industry, widely faulted for its role in the subprime mortgage debacle and ensuing credit crisis.

The action by the five-member Securities and Exchange Commission was another government response touching on the global financial crisis set off by mortgage securities. The commissioners voted unanimously at a public meeting to adopt the new rules, most of which will take effect in about 60 days.

SEC Chairman Christopher Cox called adoption of the new rules ''a significant and substantive action'' that affects every aspect of the rating agency business and will give the investing public access to a trove of new information while promoting needed competition in the industry. After nearly a century of policing itself, the industry came under SEC oversight through a 2007 law.

See full Article.

Statement on Proposal to Increase Investor Protection by Reducing Reliance on Credit Ratings

by Chairman Christopher Cox

Good morning. This is an open meeting of the U.S. Securities and Exchange Commission under the Government in the Sunshine Act on June 25, 2008.

Today we are continuing our consideration of several rules that would reform the regulation of credit rating agencies. We have divided consideration of these several rules into three parts. Two weeks ago, on June 11, the Commission proposed the first two parts. Today we will consider the third part.

The entire package of reforms is born of the subprime mortgage crisis, and the resulting credit crunch. These events of recent months have had a profound effect on our economy and our markets, and they have galvanized regulators and policymakers not only in this country but around the world to re-examine every aspect of the regulatory framework governing credit rating agencies.

See full Statement.

Fitch Says Worst of Credit Storm is Over for US Banks

Fitch Ratings suggests the worst of the credit crisis is over for US commercial banks, though there is still some clean-up to be done.

In its Quarterly Review of the 30 largest US banks, Fitch gives the credit crisis a meteorological workout:

“The long dreaded, broad-based deterioration in consumer asset quality escalated during 2Q08 like the sudden movement of a tropical storm. Much like weather forecasts and storm warnings, no matter how many dire predictions before the storm, the reality of the storm’s destruction and devastation always seems to take everyone by surprise. In common with the high winds at the leading edge of the storm; loan loss provisions do the most damage and make the most noise. Similarly the increases in non-performing loans and net charge-offs are much like the collateral damage that takes months and, in some cases, years to fully clean up and rebuild.”

See full Article.

La crisis crediticia y el fracaso del análisis de riesgos

Es poco probable que, cuando se siente, mire debajo de su asiento para ver si hay una bomba. Aunque podría matarle, la probabilidad de que haya una bomba es mínima.

Según los participantes en la mesa redonda anual sobre riesgos financieros organizada por Wharton Financial Institutions Center y Oliver Wyman Institute, un punto de vista similar fue lo que provocó que banqueros, reguladores y burócratas hicieran la vista gorda ante inversiones y modelos empresariales bastante arriesgados que contribuyeron a la crisis crediticia global.

Northern Rock apenas es conocido en Estados Unidos, pero el colapso de este banco británico refleja el fracaso del análisis de riesgos que contribuyó a acrecentar los problemas de empresas como Citigroup, Bear Stearns y Merrill Lynch. Apenas unos meses antes de la crisis -y posterior operación de salvamento del Gobierno británico-, Northern Rock, quinto banco del país por hipotecas concedidas, era considerado uno de los mejores por cifra de resultados, explicaba David T. Lewellyn, profesor de Banca y Finanzas en Loughborough University, Inglaterra.

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