S&P Global Ratings' sustainability insights provide transparency on established and emerging environmental, social, and governance risks and trends—and how they impact economies, companies, and markets.
Climate change is a megatrend that can have material impacts on the creditworthiness of issuers and debt instruments.
In our latest white paper, S&P Global Ratings presents plausible long-term scenarios to help illustrate the potential impacts of climate change on credit transmission channels—and ultimately on creditworthiness.
We define three scenarios for climate transition risks, and four for physical climate risks, in line with our five-step process to assess the credit materiality of megatrends. We incorporate takeaways from climate scenario analyses we have conducted, with the aim of providing possible common ground for similar analyses in the future.
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Sustainable finance is about more than funding activities and investments that already foster a greener, low-carbon, and more climate-resilient future in alignment with the Paris Agreement. It's also about financing those that aren't yet compatible to the same degree but do contribute to a reduction of greenhouse gas emissions.
In our inaugural Sustainability FAQ, we answer market participants’ questions on how we view green and transition financing through our coverage and capabilities.
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By 2050, if global warming does not stay well below 2 degrees Celsius (2 C), up to 4.4% of the world's GDP could be lost annually, absent adaptation. This will test countries' adaptation plans, particularly those of lower-income nations that are disproportionately exposed and less able to prevent permanent losses. The GDP at risk measure is based on a static view of the economy, assuming no adaptation and that all hazards occur in one year in all exposed places.
The rising likelihood of compound climate events adds to the challenges of climate analytics. Understanding these non-linear dynamics appears crucial to assessing specific risks each country faces and may help policymakers pursue more-targeted policies.
The adaptation gap is widening, given slow progress on preparedness, and financing conditions are tightening. Financing rising adaptation costs as the impacts of climate hazards worsen may become more difficult in an environment of higher interest rates, adding another hurdle to developing countries' adaptation implementation.
Although the volume of clothes produced and sold globally is increasing alongside its environmental impact, the apparel sector's carbon emissions, waste, and pollution risks remain largely unpriced.
At the same time, the financial impact of environmental risks on the sector and our ratings has so far been negligible, reflecting a lack of stringent environmental regulations and little change in consumers' buying behavior.
We believe value- and fast-fashion retailers--whose earnings are mostly led by volumes--could become more exposed to these increasing risks than luxury brands.
Due to high mortgage interest rates and persistently high real estate prices, a median priced home is now unaffordable for a median income American household.
Conditions are most acute for households in highly populated areas and earning less than the U.S. median income, over 63% of which now spend greater than 30% of household income on housing.
Demand for assistance from U.S. affordable housing issuers has risen, leading to a 32% year-to-date increase in debt issuance over 2023 highs.
At some point, not-for-profit housing issuers, particularly multifamily lenders, may struggle to preserve credit quality by deploying reserves to meet affordable housing needs.
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S&P Global Ratings rates over $2.6 trillion in outstanding green, social, sustainable, and sustainability-linked bonds (GSSSBs), and maturities from April 2024 through 2028 have grown to $1.2 trillion. The growth in GSSSB issuance is leading to rising maturities, but we expect them to remain manageable.
Annual maturities through 2028 peak at $307 billion in 2026, and annual issuance over the past few years has been roughly double this amount. As a result, we think the depth of the GSSSB market is more than sufficient to meet refinancing needs. What's more, over 90% of GSSS bonds are rated investment-grade.
Green bonds represent 51% of the total GSSSB maturities through 2028, followed by sustainability bonds (22%) and social bonds (20%). Europe is the main issuing region with 41% of maturities through 2028.
As environmental, social, and governance (ESG) factors become integral considerations in the marketplace across many types of analysis, investors are seeking more and clearer information about what these mean, including their relevance and materiality.
In this context, S&P Global Ratings and S&P Global Sustainable1 have jointly researched two dimensions of ESG materiality: stakeholder materiality and financial materiality. 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.
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