In an effort to provide investors with insight into publicly traded companies’ carbon-related risks, credit rating agency Moody’s Investors Service has released its assessment framework.
The rating agency’s carbon transition assessments (CTAs) are not credit ratings. Instead, they aim to capture non-credit risks that are relevant to investors.
Moody’s said that its CTAs “provide a relative ranking of issuers… and can be used as a research tool for systematic analysis of carbon transition and its potential to influence credit risk.”
Companies’ overall CTA scores are a weighted average of their scores on four key risks, including current carbon exposure, medium-term technology risk, mitigation strategies and long-term exposure to a rapid transition to a low-carbon economy.
“Moody’s CTA is an indicator of risk that provides a forward looking standardized approach to analyzing carbon transition risk using [a] relevant and material set of characteristics,” said James Leaton, vice president and senior credit officer at Moody’s.