MIAMI – With 46 straight days of 37 deg C heat and coastal waters approaching hot-tub temperatures, Miami can seem like a clear example of the costs of a warming world. But analysts at S&P Global aren’t sweating it.
It’s only 15 years since S&P, Moody’s Investors Service and Fitch Ratings famously misjudged the subprime mortgage market that triggered the 2008 financial meltdown. Now, they’re under fire for potentially underestimating potential climate losses in a rating system more tuned to the near term. Moody’s estimates that sectors facing high or very high environmental credit risk now account for US$4.3 trillion in rated debt, a figure that’s doubled since late 2015. But when the Institute for Energy Economics and Financial Analysis, a non-profit in Lakewood, Ohio, looked at Moody’s ESG credit scores for 721 companies in high-emitting industries, it found that about 60 per cent of issuers with high credit ratings were highly exposed to environmental risks, including climate change.
For example, if climate risks were properly calculated under a conservative, low-emissions trajectory, 58 sovereigns would experience “downward pressure” on ratings by 2030. Chile and India would be among the worst hit. The affected countries’ annual interest payments would rise by as much as US$67 billion under the moderate scenario, and up to US$203 billion under a more extreme scenario.
As for the US$3.8 trillion US municipal debt market, Mr Tom Doe, president of the research firm Municipal Market Analytics, said that as far as he knows, “no US municipal issuer’s credit rating has been changed because of climate change risk.”