Greater regulation on high carbon dioxide-dependent industries could put as much as $3.7 trillion in rated debt at risk. A report published by Moody's Investors Service points to higher governmental focus on climate-change initiatives and the change in consumer behavior since the global onset of the COVID-19 pandemic as catalysts for higher credit risk for these sectors.
Government stimulus support, particularly in Europe, has shown in some cases to favor loan applications from companies that will show they will use funds in accordance with green or sustainable practices. German stimulus packages will emphasize, among other initiatives, support for electric vehicles, as well as efficient buildings and public transportation. Canada, an economy historically dependent on carbon emissions, plans to require greater transparency on climate-related financial disclosures.
The impact of the COVID-19 pandemic is also expected to have a lasting effect on the use of fossil fuels as consumer behavior might be fundamentally changed.
Two industries — unregulated utilities and power, and coal mining and terminals — were noted as having relatively heightened risk relative to their other high-CO2-emitting peers.