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Research Announcement:

Moody's - Carbon transition positioning is an increasingly important credit consideration as net zero pressure mounts

29 September 2021


London, September 29, 2021 --

  • Moody's Investors Service has assigned Carbon Transition Assessment (CTA) scores for nearly 400 rated issuers worldwide to date, covering many of the largest companies in the most affected sectors
  • CTA scores assess companies' positioning based on how well their business models align with the transition to a low carbon economy

Companies' positioning for the ongoing carbon transition is becoming an increasingly important credit consideration, says Moody's Investors Service in a new summary of its published Carbon Transition Assessment (CTA) scores and analysis. Some sectors are already experiencing a rapid transition in certain markets, while others face mounting pressure to articulate a trajectory to net zero emissions.

"We expect that the tightening of policy and financial sector commitments to net zero alignment will continue to ratchet up pressure for decarbonisation and influence the cost of capital," says Frank Medrisch, an Assistant Vice-President at Moody's Investors Service. "While the accelerated carbon transition presents risks to companies poorly positioned for these shifts, companies that are able to benefit from opportunities and alignment strategies could strengthen their credit profiles."

Moody's CTA scores assess how well companies are positioned for the carbon transition using a 10-point scale that covers four categories: advanced, strong, moderate, and poor. To date, Moody's has published CTA scores for nearly 400 rated debt issuers globally across sectors most exposed to carbon transition risks, including the auto, airline, utilities, and oil & gas industries. Moody's will continue rolling out new and updated CTA scores in the coming months.

Technological developments are facilitating better carbon transition positioning for certain sectors, such as auto manufacturing and power, by providing solutions at scale that enable emissions cuts this decade in line with the International Energy Agency's Sustainable Development Scenario, in some regions. Automakers' CTA scores, for example, are lifted by advances in electric vehicle production, indicating stronger positioning.

Other sectors, including oil & gas and airlines, face a fundamental challenge to align themselves with a low-carbon future without major breakthroughs in solutions or changes to business models. Oil suppliers are particularly challenged by declining demand and strong ties to the fossil fuel value chain, limiting their ability to improve their CTA scores.

Subscribers can access Moody's CTA Dashboard, an interactive tool that displays all CTA scores published to date and enables carbon transition risk comparison across sectors, regions, countries and issuer ratings: https://www.moodys.com/research/Cross-Sector-Global-Carbon-transition-assessment-scores-dashboard--PBC_1304171

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at [email protected] or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

James Leaton
Senior Vice President
Rating Research
Moody's Investors Service Ltd.
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Frank Medrisch, CFA
AVP-Analyst
Rating Research
Moody's Investors Service Ltd.
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Brian Cahill
MD-MIS Env Social & Governance
Rating Research
Moody's Investors Service Pty. Ltd.
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Releasing Office :
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London, E14 5FA
United Kingdom
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

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