Transitional finance could be a path to carbon neutrality for largest carbon-emitting industries, report says

NEW YORK, March 9, 2021 / PRNewswire / – S&P Global Ratings believes transition funding, including issuance, could contribute up to 1000 billion dollars per year to the economy, as companies in hard-to-shrink sectors that were previously absent from the sustainable debt market raise capital and use the proceeds for activities that help them reduce their carbon footprint.

According to our new report “Transition Finance: Finding A Path To Carbon Neutrality Via The Capital Markets,” released today, as the transition to a net zero economy gains momentum, we believe new sectors and issuers will enter the market. , widening the pool of sustainable investable financing and allowing investors to diversify their contribution to sustainability objectives.

“It has become clear that the appetite of issuers and investors for financing climate response and other environmental goals is strong and accelerating, but the achievement of the goals of the Paris Climate Agreement and the 2050 climate neutrality goals will require significant investments in new processes and technologies that enable the decarbonization of high carbon industries, ”said a sustainable finance analyst Lori Shapiro.

Transition finance offers a potential solution by allowing larger carbon-emitting industries and companies to raise capital and use the profits for activities that help them reduce their carbon footprint.

“We anticipate that transition funding will expand beyond the product-use bond model to include sustainability-related financial products and others, helping companies and countries increase capital allocation for meet their net zero emission commitments, ”Ms. Shapiro said.

We expect the bridging label to take on a much broader scope and be used across a variety of industries and activities, ranging from entities making efficiency improvements to potential overhauls of entire business models. Ultimately, we believe the transition label will extend to a range of financial products that help increase the allocation of capital for companies and countries able to demonstrate rigorous and achievable climate transition strategies. The challenge remains how this can be done quickly and efficiently while avoiding major downside risks, including green-washing or transition-washing.

This report does not constitute a rating action.

The report is available to RatingsDirect subscribers at www.capitaliq.com. If you are not a RatingsDirect subscriber, you can purchase a copy of the report by calling (1) 212-438-7280 or emailing [email protected]. Rating information can also be found on the S&P Global Ratings public website using the ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.

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