Moody’s Sees $45 Trillion Investment Opportunity from Carbon Transition
In a series of new reports released this week, global integrated risk assessment firm Moody’s explored the anticipated climate-related impact over the coming decades to companies across geographies and sectors, including risks and opportunities from the emerging climate transition, and the exposure of companies to the threats posed by physical hazards resulting from climate change.
The first report, “Ready or not? Sector Performance in a Zero-Carbon World,” draws on insights from Moody’s ESG Solutions, Moody’s Investors Service and Moody’s Analytics, analyzes the transition readiness of several emissions-intensive sectors including utilities, automotive, airlines, cement, shipping, and oil and gas. These sectors are seen as key to global efforts to decarbonize the economy, accounting cumulatively for 85% of global emissions.
The report finds that some sectors have made significant advancements towards decarbonization, indicating that a rapid shift in carbon intensive sectors is possible, and pointing to potential opportunities for companies to capture growth opportunities by moving quickly on the transition. The automotive and utilities sectors in particular stand out, with 18 of 19 major automakers assessed as being in strong or advanced positions for rapid transition, and rapid declines in the cost of renewable energy pushing European and US power providers to retire coal-fired plants and deploy renewable assets.
Oil and gas companies, by contrast, are the least prepared, according to the report, with over 4 out of five integrated oil companies rated either ‘poor’ or ‘moderate’ on transition readiness.
Overall, the report estimates a $45 trillion investment opportunity over the next two decades from the carbon transition, with the global economy potentially benefiting from a nearly 25% cumulative gain in GDP, compared with a scenario in which no action on climate is taken.
In the foreword to the report, Rob Fauber, President and Chief Executive Officer of Moody’s Corporation, said:
“Looking at the data, it is clear that carbon transition will be a key factor in corporate competitiveness. What emerges is a picture of mixed momentum and preparedness within and between sectors in the race to zero. While confirming the well understood risks that face sectors like oil and gas, the report also highlights important differences among other industries.”
The second report, published by Moody’s ESG Solutions, explores the potential impact of physical climate hazards on companies around the world, based on analysis of over 5,000 publicly listed companies and 2 million facilities.
The report finds that nearly all sectors face significant exposure to heat and water stress, with between 33-38% of assets exposed to those hazards. The manufacturing industries are particularly vulnerable to these hazards, with some of the highest exposures in these areas by sector include Food, with 55-60% with high exposure to heat stress and 44-49% to water stress, and Chemicals, with 54-59% to heat and 45-50% to water stress. Other highly exposed segments include computer and electronic product manufacturers – mostly semiconductor companies – and petroleum and coal, and nonmetallic mineral products companies.
Other significant exposures include real estate and construction sectors to wildfires, floods and hurricanes, water and air transport, with the proximity of ports and airports to coasts exposing them to rising sea levels and to hurricanes/typhoons, and brick & mortar retailers to hazards including heat stress and wildfires.
Click here to view Ready or not? Sector Performance in a Zero-Carbon World and the Moody’s ESG report.