Climate change to hit credit ratings: S&P

[donsutherland1]

From CNBC:

 

Climate change will be a significant factor in sovereign credit ratings and is already putting them under downward pressure, Standard & Poor's Ratings Services (S&P) warned on Thursday.

 

In a new report, S&P argued that climate change – and particularly global warming - will hit countries' economic growth rates, their external performance and public finances.

 

http://www.cnbc.com/id/101676531

 

The report can be found at: https://www.globalcreditportal.com/ratingsdirect/renderArticle.do?articleId=1318252&SctArtId=236925&from=CM&nsl_code=LIME&sourceObjectId=8606813&sourceRevId=1&fee_ind=N&exp_date=20240514-20:34:43

[A-L-E-K]

Interseting. You have to wonder much longer before insurance companies start taking a hard look at places like Miami.

[Msalgado]

Interseting. You have to wonder much longer before insurance companies start taking a hard look at places like Miami.

 

Insurance companies are already factoring in climate change quite heavily.

[Msalgado]

I don't put much stock in anything the ratings agencies do.  They're really bastions of shoddy work and bull****, so I don't put much weight behind this either.  Its not that I don't think they're end result is logical but they lack so little credibility after what they did in the past 10-15 years that I'm not sure why anyone would want to point to them as an example of having good judgement.

[ORH_wxman]

 

Insurance companies are already factoring in climate change quite heavily.

 

 

One of my friends I majored with in college works for reinsurnace and they make a boatload on the premium regular insurance companies are now willing to pay in the hurricane prone regions to cover themselves. 2004 and 2005 really scared them.

[donsutherland1]

I don't put much stock in anything the ratings agencies do.  They're really bastions of shoddy work and bull****, so I don't put much weight behind this either.  Its not that I don't think they're end result is logical but they lack so little credibility after what they did in the past 10-15 years that I'm not sure why anyone would want to point to them as an example of having good judgement.

I don't believe one should assume that the article means that the ratings agencies have fundamentally relearned risk management in the wake of their disastrously simplistic assumptions of mortgage-related risk and related contagion. I do believe there has been some improvement, but the proverbial jury is still out. One may not fully know whether their reforms have bolstered their work with real world relevance until the next recession or even real estate shock.

 

I suspect the larger story from this report is that even as there is a noisy rearguard action in some economic sectors (those whose business models depend mostly or entirely on the status quo) to avoid the uncomfortable issue of how to adapt to ongoing climate change (a real issue even if there were no anthropogenic component), there is a growing movement among firms to begin to come to grips with climate change. Climate change is one of the major long-term risks that entail real economic costs, potentially substantial ones in some areas. Hence, firms have quietly moved beyond the issue of the science and into the planning and implementation stage. The ratings agencies merely offer a degree of confirmation for a trend that has been underway for some time and is beginning to gain force. Adaptation will be one of the keys to managing overall business risks and realizing opportunities going forward. Refusal or unwillingness to adapt will only compromise companies' strategic flexibility and inflict high opportunity costs on their shareholders.