Credit ratings agency Fitch Ratings announced today the publication of Climate Vulnerability Scores, examining sector exposure to low-carbon transition risks, for several new sectors, including auto manufacturing, aerospace and defence, transportation, and technology, media and telecommunications, with plans to roll out more in the coming months.
Fitch’s Climate Vulnerability scores provide the agency’s view of the creditworthiness impact of sectors, companies and debt securities to a rapid low-carbon transition between 2025 and 2050. According to Fitch, the scores were developed in response to a need by investors for a long-term view of transition risks, recognising the implications for instruments of different maturities and strategies, to help manage these risks and support security selection, portfolio management, risk management, monitoring and reporting. Fitch initially launched Climate Vulnerability Scores last year for the utilities, oil and gas, and chemicals sectors.
The new scores draw on the UN Principles for Responsible Investment Inevitable Policy Response Forecast Policy Scenario (IPR FPS). Released in October 2021, the IPR FPS lays out a high conviction prediction of a significant acceleration in climate policy by 2025, driven by climbing pressure from a variety of sources, including investors, businesses and civil society. According to the forecast, the change in policy could be sufficient to move the world to a below 2C pathway by 2025.
Some of the key factors in the FPS forecast include major policy shifts affecting energy, food and land systems, driving energy sector emissions down by 75% by 2050, and land returning to “carbon sink” status by that time, leading to a greater than 100% reduction in CO2 emissions. Overall, the scenario envisions emissions peaking mid-2020s, followed by an inflection point in reductions in 2030.
Major FPS sectoral implications include fossil fuel usage peaking mid-2020s and declining 60% by 2050, wind and solar generation growing to 30% of electricity generation by 2030, zero emission vehicles representing 30% of cars on the road by 2030, meat consumption peaking by 2030, and hundreds of millions of hectares of agricultural lands replaced by forests over the coming decades.
The scores are available on a subscription basis through Fitch’s website. Fitch made the scores for transportation sectors available without a subscription, in a report indicating that airlines are the most exposed of the sectors, with a 2025 score of 30 (scores range from 10 to 90, with 10 indicating little expectation of disruption, and possibly benefit from the transition, and 90 implying an existential threat to core business activities), rising to 50 in 2050, with shipping the second most vulnerable, and rail the best-positioned.
Fitch stated that it aims to extend its Climate Vulnerability Scores coverage across all sectors, with plans to publish reports on additional sectors inclluding lodging and gaming, diversified manufacturing, metals and mining, fertilisers, healthcare and pharmaceuticals, retail and consumer goods, building materials, and agribusiness in May and June.
Click here to access the transportation Climate Vulnerability Scores report.