Fitch Ratings: Coronavirus May Slow but Won't Derail Low-Carbon Transition

(The following statement was released by the rating agency) Link to Fitch Ratings' Report(s): https://www.fitchratings.com/site/re/10119831 Fitch Ratings-London-April 29: The coronavirus pandemic may slow the low-carbon transition, but its short-term fallout will not be a serious setback, Fitch Ratings says in a new report. We do not expect any change in the trajectory of the transition. Some green initiatives could face delays. EMEA auto producers, for example, have been lobbying for the postponement of new European vehicle-emissions standards. A delay would support short-term cash flow in the sector, which faced challenging trading conditions in 2019. However, any temporary delay will not affect long-term investment plans for low-carbon vehicle fleets and infrastructure. The European Commission's (EC's) Green Deal also faces some delays, with the 2020 work programme revised to push lower-priority initiatives on aviation fuels and smart mobility into 2021. We still expect the centrepiece revision of the 2030 emissions target to proceed, with the EC pointing to a potential increase in reduction requirements, to around 50% from 1990 levels, from 40%. Aviation restrictions will significantly affect the market for carbon. While total emissions fell by a record 8.4% under the EU Emissions Trading System (ETS) in 2019, aviation was the only sector with increased emissions. However, the coronavirus outbreak will lead to a substantial fall in aviation emissions in 2020. The effect of the international Carbon Offsetting and Reduction Scheme for International Aviation scheme on demand for carbon offsets will be heavily influenced by the depth of the fall in revenues for the aviation industry and the subsequent pace of its recovery.

Most emergency relief packages announced to date do not include specific conditions related to climate change, although such conditions were part of discussions in a number of countries. However, we expect environmental objectives to form a bigger part of post-coronavirus recovery plans, particularly in Europe. Central banks are increasingly taking climate considerations into account when setting prudential requirements and managing their own assets. The spread of coronavirus and its economic impact has led to a wave of downgrades and Negative Outlooks across asset classes. However, these rating actions were not driven by climate-related factors, and in the coming months we do not expect any far-reaching material changes to these factors that would have a credit impact. Our report, "Climate Risk and the Coronavirus Pandemic", is available at www.fitchratings.com or by clicking on the link above. Related Research: Fitch Ratings' ESG Framework and Coronavirus /a Contact: David McNeil Associate Director, Sustainable Finance +44 20 3530 1942 Fitch Ratings 30 North Colonnade London E14 5GN Mervyn Tang Senior Director, Sustainable Finance +852 2263 9633 Andrew Steel Managing Director, Sustainable Finance +44 20 3530 1596 Tatiana Kordyukova Senior Director, Fitch Wire +44 20 3530 1954 Media Relations: Adrian Simpson, London, Tel: +44 20 3530 1010, Email: adrian.simpson@thefitchgroup.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. Additional information is available on www.fitchratings.com Related Research Fitch Ratings' ESG Framework and Coronavirus https://www.fitchratings.com/site/re/10119833 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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