LONDON (Standard & Poor’s) May 22, 2014–Investors are paying increasing attention to the impact of carbon and climate risk on corporate credit quality, yet their focus has largely been on regulated liabilities that reflect direct risks from regulations such as emissions trading schemes and other carbon pricing mechanisms. Outside of highly polluting industries, however, few companies recognize or account for the cost of carbon on their operations.
Standard & Poor’s Ratings Services believes that investors can address this shortcoming with a more thorough assessment of carbon price risks–from the raw materials supply to end demand–giving management and investors greater insight on the effects of carbon price risk across the business.
In a report published today by Standard & Poor’s, with carbon advisory firm RepuTex, we examine 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.
To view more research from Standard & Poor’s, please click here.
