- CANBERRA, AAP – The acceleration in the race to reduce carbon emissions to net zero will increase credit risks and the cost of doing business for major emitters, a leading ratings agency says.More financial institutions will commit to change this year, creating significant momentum for capital to shift away from greenhouse gas emitting activities that are not aligned with a net zero strategy, Moody’s Investors Service has warned in a report.While Australia is sticking to its existing 2030 target, and is yet to formally commit to net-zero emissions by 2050, many governments are now focused on more ambitious cuts this decade to achieve net zero by mid-century or earlier.Moody’s expects more intense pressure on major fossil fuel producers and users to adopt credible transition plans and open their books to greater scrutiny under stronger governance regimes.The Glasgow Financial Alliance for Net Zero initiative is chasing a critical mass of meaningful financial sector net-zero commitments, and regulators are already on board for new climate-related disclosure requirements.Australia’s prudential regulator last week released draft guidance to banks, insurers and superannuation trustees on managing the financial risks of climate change.Moody’s expects more financial institutions to embrace net-zero in the lead up to United Nations climate talks in Glasgow later this year, after the United States changed tack under the Biden administration.”These financial sector initiatives, if followed through on, will require meaningful changes in portfolio investment and lending practices by the end of the decade for those who are signatories,” said James Leaton, senior vice-president at Moody’s.He expects the impact to be more significant than the previous patchwork policy implementation, gradual changes in disclosure requirements or voluntary moves by funds to reduce oil and gas holdings.
Moves in the finance sector already include the Net Zero Asset Owners Alliance of 37 institutional investors with $US5.7 trillion ($A7.4 trillion) under management, including Australia’s QBE, committing to transition their investment portfolios to net-zero emissions by 2050.
The Net Zero Asset Managers Initiative is a group of 87 asset managers with $37 trillion ($A49 trillion) under management.
A Net Zero Banking Alliance, comprising 43 global banks, have also made commitments.
The United Nations estimates that 121 countries, 23 regions and 509 cities – representing 68 per cent of global GDP – have now signed up to decarbonise.
Moody’s warns emitters on race to net zero
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