Skip to main content

Thank you for visiting nature.com. You are using a browser version with limited support for CSS. To obtain the best experience, we recommend you use a more up to date browser (or turn off compatibility mode in Internet Explorer). In the meantime, to ensure continued support, we are displaying the site without styles and JavaScript.

Rating climate risks to credit worthiness

Nature Climate Change volume 8, pages 454–456 (2018)Cite this article

Subjects

Credit ratings agencies are now accounting for climate change risks in their ratings of credit worthiness. This could incentivize climate risk reduction efforts if it allows organizations access to cheaper credit. Karl Mathiesen investigates the extent to which this is happening in practice.

In December 2015 and January 2016, a winter deluge flooded the construction site, setting the project back several months. S&P responded immediately, downgrading the company’s outlook from stable to negative. A year later, as delays and flooding issues dragged on, the ratings agency stepped in again, with a further downgrade. Physical risks, such as floods, are “a high proportion of all changes to ratings”, said Michael Wilkins, a managing director who leads S&P’s sustainable finance group. In fact, in a 2017 report, S&P used Aberdeen Roads Ltd as a prominent case study to show how it accounts for environmental and climate risk.

This is a preview of subscription content

Access options

Rent or Buy article

Get time limited or full article access on ReadCube.

from$8.99

Rent or Buy

All prices are NET prices.

References

  1. 1.

    Wilmore, J. Why did Aberdeen's bypass hit Carillion so hard? Construction News (22 January 2018); https://go.nature.com/2FI4u7p

  2. 2.

    Lou, M. & Dallos, G. How credit rating agencies are slowly but surely reacting to cli-mate risk. Unearthed (28 January 2018); https://go.nature.com/2rjTw2E

  3. 3.

    Lipan, C. M. Exgen Texas Power Llc, an Exelon Corp. subsidiary files for bankruptcy, blames cheap gas prices and wind power. Shipkevitch (13 November 2017); https://go.nature.com/2rjWXHv

  4. 4.

    Vattenfall completes German lignite business sale. Vattenfall (30 September 2016); https://go.nature.com/2wfgBcy

  5. 5.

    Climate Change Impacts in the United States: Highlights (US National Climate Assessment, 2014); https://go.nature.com/2jv2qqu

  6. 6.

    Kernan, P. et al. How Does S&P Global Ratings Incorporate Environmental, Social, and Governance Risks Into its Ratings Analysis (S&P Global, 2017); https://go.nature.com/2HQleuZ

  7. 7.

    Taylor, L. Expect more 'Lucifer' heatwaves to scorchEurope, scientists say. Reuters (27 September 2017); https://go.nature.com/2wfhcuO

  8. 8.

    VW scandal: how has it impacted Volkswagen’s stock? (VLKAY). Investopedia (5 October 2016); https://go.nature.com/2HOF127

  9. 9.

    How asset level data can improve the assessment of environmental risk in credit analysis. Global Credit Portal (3 October 2016); https://go.nature.com/2FHwwQn

  10. 10.

    Flavelle, C. Moody's warns cities to address climate risks or face downgrades. Bloomberg (29 November 2017); https://go.nature.com/2w93tWp

  11. 11.

    US municipal bond market ticks up to $3.8337 trillion in Q4, Fed says. CNBC (9 March 2017); https://go.nature.com/2rka1MW

Download references

Author information

Affiliations

  1. Freelance journalist, London, UK

    Karl Mathiesen

Authors
  1. Karl Mathiesen
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Karl Mathiesen.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Mathiesen, K. Rating climate risks to credit worthiness. Nature Clim Change 8, 454–456 (2018). https://doi.org/10.1038/s41558-018-0184-z

Download citation

Further reading

Search

Advanced search

Quick links

Nature Briefing

Sign up for the Nature Briefing newsletter — what matters in science, free to your inbox daily.

Get the most important science stories of the day, free in your inbox. Sign up for Nature Briefing