Climate change will disrupt every
facet of society. S&P Global Ratings’
Sustainability Insights will explore the
potential impacts.
This S&P Global Ratings' research explores how companies in the metals sector are approaching climate transition risks. We focus on steel and aluminum, the most produced metals, and on major, rated metal-producing companies in the U.S., Europe, and APAC. We first assess greenhouse gas (GHG) concentrations in key manufacturing processes used by metals companies. We then look at the operational strategies and solutions that companies are adopting, or considering, to reduce their GHG emissions, including for challenging-to-address emissions. Finally, we assess how regulatory developments could affect metals companies and regions.
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This second part of S&P Global Ratings' research into decarbonizing the metals sector (focused mainly on steel and aluminum producers) examines the credit challenges facing the sector as a result of increasingly visible credit risk transmission channels. We notably conducted sensitivity analysis on the potential credit influence of regulations and on the strategies of EU and non-EU companies that we rate. The decision to use two samples reflects the fact that regulation is already essentially in place for EU producers, enabling us to estimate the future impact of the Carbon Border Adjustment Mechanism (CBAM) and EU Emission Trading System (ETS) reform on their EBITDA until 2035--based on the reduction of free carbon allowances and expected increasing price of carbon emissions.
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U.S. governments could face worsening physical climate risks. Data and scenario analysis on climate hazards can provide greater visibility about potential long-term risks relevant to our view of creditworthiness.
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This research aims to understand the progress made by companies on adapting to the physical impacts of climate change. To do this, S&P Global Ratings analyzed 6,871 responses in the 2022 S&P Global Sustainable1 Corporate Sustainability Assessment, as well as 130 companies' adaptation and resilience plans, to evaluate the potential efficacy of companies' adaptation strategies in the face of worsening climate hazards.
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