Climate Change threaten the solvency of companies ?

Corporate solvency could be threatened in the future by the multiplication of major climatic events and their economic impact, according to a study by the financial rating agency Standard and Poor’s released on the 14th of April 2015.

"As recent history shows that natural disasters have been an important factor in the rating of the creditworthiness of companies, their effect in the future could be amplified considerably as we are faced with frequent weather events and extreme, " according to the study.

So far, according to SP, companies have managed "to offset any negative impact by a combination of cash management, insurance, management of major risks, and implementing measures after the event."

"But we believe that such provisions could become much less effective in the future," added the rating agency.

"Although natural disasters can cause property losses and interruptions of production and markets, this type of event is not frequently a negative rating factor. Since 2005, we have identified natural disasters (tropical storms, floods, droughts and earthquakes) occurred as a factor in at least 60 negative ratings (including downgrades or outlook revisions), "she says.

In about 70% of cases, natural disasters have led to a one notch downgrade or negative outlook which however ultimately resulted in a maintenance of the rating of the company.

In other cases, natural disasters have led to a deterioration of several notches, and 10% of them to a default, notes SP.

"As we prepare for the future with a higher frequency of natural disasters with economic, companies will have to improve their communication about their exposure to this type of weather events," said Standard & Poor’s.

From AFP article published on the 21th of April 2015 Source

More information Standard & Poor’s website

publié le 19/12/2016

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