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Moody’s says green tech, ESG and sustainability requirements will shape credit outlook in 2024
- Green technology and disruptive innovation will increasingly drive investment and business decisions in sectors most exposed to the carbon transition, ratings agency says in report
- UBS cautiously optimistic about the energy transition as an investment theme in the medium to long term
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Green technology, climate financing and sustainability disclosure requirements will shape the outlook for credit ratings in 2024, Moody’s Investors Service said.
Environmental, social and governance (ESG) considerations have a significant credit impact on a large number of debt issuers, and are likely to increasingly affect the strength of their ratings over time, the ratings agency said in a report on Monday.
The report identifies the key ESG credit themes Moody’s will be monitoring this year and “provides a view on how they may crystallise into credit risks over the short to medium term”.
“Green technology and disruptive innovation will increasingly drive investment and business decisions in sectors most exposed to the carbon transition, but lacklustre economic conditions and geopolitical strains will pose hurdles to net-zero ambitions,” Moody’s analysts led by vice-president and senior credit officer Rebecca Karnovitz said in the report.
Despite the overall momentum for a more rapid decarbonisation of the global economy, high interest rates and slowing global growth could temper green investment in 2024 and pose hurdles to the execution of capital-intensive projects, said Moody’s.
While the US and China agreed to resume cooperation on climate-related issues in November, progress will largely depend on the evolution of the two countries’ broader diplomatic relationship, according to the report.
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