Publication / 01 Feb 2019

Connecting the Dots: Energy Transition Scenarios and Credit Quality

Trucost explores how energy transition scenarios and scenario adjusted financials could be integrated into credit models to determine whether there could be a material impact on a company’s credit quality.

Trucost produced this report as part of our commitment to the EU Commission funded Energy Transition Risk project.

The ET Risk consortium, which is funded by the European Commission, aims to develop key analytical building blocks for energy transition risk assessment and bring these capabilities to the market.

This paper presents findings regarding the implications of climate transition scenarios for credit quality for a sample of nine companies in three high-emitting sectors (power utilities, cement, and steel) that are subject to considerable transition risks and opportunities. The analytical approach uses detailed bottom-up company asset-level data and proprietary financial modelling developed by The COFirm for its climateXcellence model. This derives forward-looking climate transition scenarios represented in financial terms, which are applied to quantitative credit quality modelling using tools developed by S&P Global Market Intelligence based on key historical drivers.

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