<\/p>\n
Share of companies facing transition risks increasing.<\/p>\n
As climate-related risks rise, the share of companies that are at risk of a credit rating downgrade due to elevated climate transition effects is on the rise too, Fitch Ratings reports.<\/p>\n
In a report released, the rating agency said 20% of the corporate issuers it rates could face a downgrade by 2035 due to climate-related risks \u2014 up from its previous estimate of 18%.<\/p>\n
The revision follows a reassessment of the long-term climate transition risks for various corporate sectors, Fitch noted.<\/p>\n
In particular, the risks facing the airline sector have increased, as have the risks for certain agricultural segments in developed markets.<\/p>\n
\u201cIssuers in more vulnerable sectors will, over time, face higher rating pressure from long-term climate risks, in the absence of mitigation efforts,\u201d Fitch said, noting that 52% of the issuers at heightened risk are investment-grade companies.<\/p>\n
The most at-risk sectors include coal-based utilities, oil and gas, and certain mining sub-sectors \u201cdue to significant emissions and lower demand forecasts,\u201d Fitch said.<\/p>\n
At the same time, sectors such as tech, media, telecom and waste recycling \u201cwill be less susceptible to transition risks,\u201d and, certain sectors, including renewables, \u201cwill benefit from the energy transition,\u201d the report said.<\/p>\n
Additionally, Fitch said it believes gas-fired generation companies in North America have seen decreased climate risk, \u201creflecting rising demand from the power sector, new liquefied natural gas export terminals under construction, and favourable policy changes since the escalation of the Russia-Ukraine conflict in 2022.\u201d<\/p>\n
While Fitch said it doesn\u2019t anticipate taking any immediate rating action driven by the rising risks, it will be closely monitoring \u201cthe transition strategies adopted by issuers facing higher climate vulnerability risk, to assess their substance, implementation and effectiveness.\u201d<\/p>\n
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