Recent announcements from Black Rock Investment Institute and Fitch Ratings add to the cadre of reports making the connection between climate risk and investments. Black Rock released in April an analysis on how investors should consider the impacts of climate-related risks on their portfolios. The report, “Getting physical, assessing climate risks,” provides a framework for assessing these risks to investment portfolios. Specifically, the analysis shows how these risks threaten the economies and creditworthiness of many U.S. municipal bond issuers and U.S. electrical utility equities. It also provides explanations for “the municipal bond market’s apparent complacency.”
Earlier this year, Fitch Ratings announced its new environmental, social and governance (ESG) relevance scores for all of its issuers and in May released these scores for infrastructure issuers. It said ESG risks for public finance and infrastructure issuers revealed very low impact on ratings, influencing the rating decision for only approximately five percent of all issuers. Governance was the most influential ESG risk factor across the overall ratings portfolio. The most impactful elements within social and environmental categories included biodiversity and natural resource management; labor relations and practices; exposure to social and environmental impacts; and human rights, community relations, access and affordability.