S&P Global Ratings believes the decarbonization path for Asia-Pacific companies beyond 2030 is highly uncertain and will be shaped by new regulations and new technologies.
The credit risks surrounding decarbonisation pathways and companies in the Asia-Pacific region are similar globally, the ratings agency said in a statement on Monday.
However, they noted that there are challenges and opportunities unique to the Asia-Pacific region, such as a high reliance on coal-based chemicals (challenges) and the presence of a large number of state-owned enterprises that can lead decarbonization efforts (opportunities).
The company noted that decarbonization could change companies' competitive position, creating differentiation in costs and customer perception.
The firm believes that increased climate-focused regulation will drive consolidation in the industry, making it more profitable, with larger companies benefiting the most.
He also said that green finance in the green finance sector is still underdeveloped and banks continue to dominate the green finance market.
According to S&P, rated companies in the Asia-Pacific region have set achievable carbon targets for 2030 without a material impact on their credit profiles in the coming years.
“The rated companies, primarily the larger companies in the region, have set carbon emissions targets that are equal to or more aggressive than those required by regulation, allowing the companies to fund their environmental spending with cash flow,” said Betty Huang, credit analyst at S&P Global Ratings.
Meanwhile, Raymond Su, a credit analyst at S&P Global Ratings, said current decarbonization measures are unlikely to result in a significant increase in companies' cost structures by 2030 as renewable energy costs fall.
“But risks may increase due to volatility in renewable energy supplies,” he added.
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