Fitch Ratings Introduces Climate Vulnerability Scores for Corporate Sectors
Fitch Ratings has begun to extend its Climate Vulnerability Ratings (Climate. VS) to all corporate sectors after introducing the scores in 2021 for the utilities, oil and gas, and chemicals industries. The reports offer market players a unified global risk methodology for assessing portfolio-level climate sensitivity and guiding portfolio transition. The approach also paves the way for Fitch to provide entity-level scores.
Fitch recently released its Climate.VS on utilities, oil and gas and chemicals, car manufacturing, aerospace and defence, transportation, technology, media, and telecommunications.
More reports are awaiting in May and June on accommodation and gaming, diversified manufacturing, metals and mining, fertilisers, healthcare and pharmaceuticals, retail and consumer goods, building materials, and agribusiness.
Each sector analysis places the sector's vulnerability to climate-transition risks in context and discusses key governmental, technological, and market elements that influence the rating to 2050.
Climate.VS is a tool that helps investors and financial institutions evaluate the long-term consequences of climate-related risks on their investment and lending portfolios while recognising the different impacts on instruments of various maturities and offering risk management methods.
There are many ways that the scores can help you choose the right security, manage your portfolio, manage your risk, and report on your progress.
Fitch's analytical view of corporate vulnerability to a rapid low-carbon transition between 2025 and 2050 is reflected in the scores.
They use the UN Principles for Responsible Investment inevitable Policy Response Forecast Policy Scenario (IPR FPS), which takes into account policy, market, and technology trajectories to generate long-term forecasts for eight policy levers.
Fitch gives scores that go up to 2050, so you can see how vulnerable different sectors and businesses are at different points in the transition.
The IPR FPS was revised recently to reflect the recent legislative, market, and technical changes. There will be more strict regulations on climate change in eight policy areas from 2025 to 2050 in the new scenario.
