Dirty downgrades: how ESG can affect credit ratings

Fitch Ratings will use a new system to study ESG factors when compiling credit ratings. Moody’s warns that debt worth $2.2 trillion across 11 sectors could be downgraded due to environmental risk.

Fitch Ratings is slowly turning up the thermostat to ensure the financial world feels the heat of rising environmental risk - and its implications on credit rating.

While Environmental, Social and Governance ESG factors have long been a consideration for corporates, the agency said it is set to become even more important. It will now judge corporates more closely by launching a new indicator that will be used to analyse 1500 non-financial corporates.

Similarly, Moody’s Ratings appears equally focused on highlighting ESG risk. Last year, it had warned that a significant proportion of existing debt in 11 sectors is at risk of being...

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