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A growing consensus around carbon emission reductions, along with increased disclosure of climate-related risks, will intensify the pressure on major carbon users and producers to rethink their future, suggests a new report from Moody’s Investors Service.

The rating agency said that the recent string of “net-zero” pledges from both governments and the financial sector is going to boost credit risk and raise the cost of capital for carbon-intensive activities. In turn, this is expected to accelerate change among major hydrocarbon users and producers.

“Major economies’ emissions reduction goals are converging,” Moody’s noted, with the U.S., Europe and Japan all pursuing major cuts by 2030, and China aiming to phase out coal.

The financial sector is also stepping up its net-zero commitments.

“These financial sector initiatives, if followed through on, will require meaningful changes in portfolio investment and lending practices by the end of the decade,” Moody’s said, adding that this will create “significant momentum for the acceleration of a shift of capital away from greenhouse gas emitting activities that are not aligned with a net zero strategy.”

“Companies are under increasing pressure to respond,” Moody’s noted. “The breadth of climate policy initiatives across policy makers, prudential supervisors and providers of capital is changing the finance landscape for companies, increasing the likelihood that credible carbon transition plans will provide a greater differentiating factor for credit strength.”

As large companies come under increasing pressure to lower emissions this will, in turn, impact their supply chains, prompting strategic shifts. At the same time, tougher disclosure requirements will increase attention on these issues, the report suggested.

“Combined with emissions targets, the expected application of climate transparency requirements in major financial markets will open up fossil fuel exposure to greater scrutiny, further widening the gulf in the cost of/access to capital among companies based on the carbon intensity of their business,” Moody’s said.

Taken together, these tougher stances on emissions and enhanced disclosure are expected to have a bigger impact than “the limited effect to date of patchwork policy implementation, gradual changes in disclosure requirements or moves by investment funds to reduce their fossil-fuel holdings,” Moody’s said.