Investors and policy makers are becoming increasingly focused on nature-related risks as biodiversity loss intensifies, in part as a result of global climate change. This is evidenced by the growing number of prominent supra-national, national and private biodiversity and nature-positive public commitments. Companies in high-risk sectors face the likelihood of greater regulatory and investor scrutiny.

Physical climate risk in Latin America and the Caribbean is especially significant for industries with fixed operating assets. Extreme climate events are disrupting operations more frequently while tightening supply chains across a wide range of sectors, including logistics and infrastructure, agriculture, mining, fishing, power generation, water utilities, and telecommunication. Latin American banks face indirect risks from their investment and lending portfolios.

Korea’s efforts to achieve carbon neutrality by 2050 will create long-term credit challenges for Korea Electric Power Corporation subsidiaries with significant exposure to coal-fired power generation. Rebalancing of the power mix toward less carbon-emitting sources, along with parental and governmental extraordinary support, will be key to mitigating the credit difficulties.

While the geographic location of assets is the key determinant of an issuer’s exposure to physical climate risks, the ultimate credit impact of that exposure also depends on other asset characteristics, transportation and supply-chain dependencies and potential risk mitigants. Relevant climate disclosures can improve risk assessment and highlight investment needs, but they remain limited.

Equifax (Baa2 stable), TransUnion (Ba2 stable) and Experian (Baa1 stable) hold sensitive consumer information, such as Social Security numbers and credit card details, exposing the companies to the risk of data theft and cyberattacks. The three credit bureaus have healthy profit margins and good cash flow generation capacity, which supports their ability to invest in cyber defenses.

The EU Taxonomy will play a vital role in helping the European Union scale up sustainable investment. Results from our in-depth research show that whilst eligibility indicators are easily identified, alignment is more difficult.