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Chinese firms more exposed to climate transition risks than global peers amid lack of decarbonisation targets: Moody’s

  • A delay in setting decarbonisation targets and associated transition plans is credit-negative for companies, Moody’s says
  • Companies face higher leverage and operating costs, diminishing demand for products and curtailed market access, analysts say

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Workers in a facility in Shijiazhuang, in China’s Hebei province, use heavy equipment to load coal onto a freight train bound for a power plant on August 16, 2023. Photo: VCG via Getty Images
Yujie Xuein Shenzhen
Most Chinese companies have failed to set a decarbonisation target, and a quarter are more exposed to increasing carbon transition risks than their global peers despite China’s carbon-neutral pledge and its leading position in renewable energy and electric vehicles, according to ratings agency Moody’s.
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Only 4 per cent of Hong Kong and mainland Chinese companies have set decarbonisation targets that align with a specific temperature pathway, as compared to about 30 per cent in Europe and 20 per cent in advanced economies in the rest of Asia-Pacific, Moody’s said in a report released on Monday.

A delay in setting decarbonisation targets and associated transition plans is credit-negative for companies, because they may have to take more aggressive action in the future to meet more stringent rules for emission reductions, which could raise costs and leverage, the report said.

“We expect Hong Kong and mainland Chinese regulators will impose more regulatory requirements for sustainability reporting, and climate-related disclosures among listed Chinese companies will improve gradually,” Moody’s said.

Workers build an electricity transmission tower near Huai’an, in China’s eastern Jiangsu Province on September 7, 2023. Photo: AFP
Workers build an electricity transmission tower near Huai’an, in China’s eastern Jiangsu Province on September 7, 2023. Photo: AFP

“Companies with detailed climate-change disclosures, challenging emission-reduction targets and effective implementation strategies are best placed to meet evolving regulatory requirements, which will reduce their carbon transition risks.”

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Nearly a quarter of the surveyed Chinese companies are significantly exposed to carbon transition risks, according to the report – a greater rate than in the US, Europe, the Middle East, and Africa but lower than the rest of the Asia-Pacific region. The report sampled 485 listed nonfinancial companies in China and Hong Kong.

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