S&P Global Ratings’ sustainability insights aim at advancing the understanding of sustainability topics related to environment, social and governance.
This S&P Global Ratings' research explores how companies in the metals sector are approaching climate transition risks. We focus on steel and aluminum, the most produced metals, and on major, rated metal-producing companies in the U.S., Europe, and APAC. We first assess greenhouse gas (GHG) concentrations in key manufacturing processes used by metals companies. We then look at the operational strategies and solutions that companies are adopting, or considering, to reduce their GHG emissions, including for challenging-to-address emissions. Finally, we assess how regulatory developments could affect metals companies and regions.
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This research explores trends in climate litigation since S&P Global Ratings published “Climate Change Litigation: The Case For Better Disclosure And Targets,” on Oct. 6, 2021. It also aims to achieve a better understanding of the potential influence of climate litigation on the creditworthiness of issuers and when such exposure might translate into a material financial impact.
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As part of this joint research between S&P Global Ratings and S&P Global Sustainable 1, we have reviewed a common set of material ESG factors for the analysis of entities and sectors, looking at how ESG issues could affect stakeholders, potentially leading to material direct or indirect financial impacts on entities. − Some ESG factors may only have the potential to yield a financial impact. Some others may have limited financial impact while the impact on stakeholders is high. − The materiality mapping exercise at the sector level can help assess this potential and the relative magnitude of the impact. It can also help evaluate the relative materiality of ESG factors, which a materiality map could graphically represent. − The effective realization of financial impact is evolving, dynamic, and inherently uncertain. Therefore, for the purposes of this mapping exercise, we will take a forwardlooking view of the materiality of an ESG factor on financial performance. − We observe that the financial impact of ESG factors is most often realized through four main drivers related to public awareness, regulations, legal actions, and accounting methods. These are not exhaustive or mutually exclusive, but interact with each other.
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Despite global macroeconomic uncertainty in some key regions, we anticipate that GSSSB issuance will increase modestly to $0.95 trillion-$1.05 trillion in 2024, from $0.98 trillion in 2023. Green bonds will continue their dominance in GSSSB markets, buoyed by increased demand for environmental projects across all geographies. Transition and blue bonds may also gain traction in the GSSSB market in 2024. We believe that issuers in middle- and low-income countries will strive to increase their share of GSSSB issuance given their large unmet funding needs.
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We conducted a scenario analysis of properties in the U.K. (focusing on England and Wales), Ireland, France, and the Netherlands, where energy performance certificates (EPCs) indicate low energy efficiency (for example classes F and G). We found that climate transition risks linked to changes in energy-efficiency performance regulations currently have a limited impact on European RMBS. This is due to uncertainties on the timing and extent of sale or rental restrictions, financing available for renovations, supply and demand in housing markets, and structural protections in RMBS transactions. Studies show there is a valuation discount for properties with low EPC classes. We found there is a low potential impact of this on our modelled loss severity assumptions, even though energy-intensive properties could face higher losses. Our weighted-average loss severity increases 2.5% at the 'AAA' rating level and 2.8% at the 'B' rating level, albeit our assumptions are very conservative.
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