New Moody’s scores reflect negative credit impact of ESG risks on metals, mining and coal companies
Moody’s Investors Service published its environmental, social and governance (ESG) issuer profile and credit impact scores for various rated issuers in the global metals and mining and coal sectors. This new ESG issuer profile and credit impact scores cover 45 metals & mining companies and 17 coal companies globally and follows the publication of ESG scores for a range of corporate issuers, utilities and US state and local governments in June 2021, and for sovereign issuers in January 2021.
The scores support Moody’s integration of ESG in its credit analysis, providing greater clarity, consistency and differentiation on risk exposure and the degree of credit impact. For example, the latest scores highlight that ESG factors have an overall negative credit impact on metals and mining companies and a more pronounced negative credit impact on coal companies.
“Nearly all metals and mining companies and coal companies have exposure to environmental considerations that carry very high credit risks. Social risks are also significant in these sectors, driven by health and safety issues and responsible production risks, with some differentiation by commodity and location of operations.”Benjamin Nelson, Moody’s VP-Senior Credit Officer
Carbon transition is the biggest environmental risk for thermal coal companies, especially in the United States, driven by growing global demand and policy support for less carbon-intensive and cleaner energy. Metals and mining companies face the most risk from their dependence on natural capital and the physical damage that mining can cause.
A company’s ability to mitigate these various ESG considerations and their significance relative to other credit drivers determines the degree to which the considerations affect its credit rating. Strong governance is an important mitigant for many highly rated companies in the metals and mining and coal sectors.
Moody’s ESG issuer profile scores (IPS) are opinions of an issuer’s exposure to ESG considerations that could be material to credit risk. ESG credit impact scores (CIS) communicate the impact those ESG considerations have on an issuer’s credit rating. Both scores use a five-point scale: 1 is positive, 2 is neutral to low, 3 is moderately negative, 4 is highly negative and 5 is very highly negative.
Source : Moody’s ESG