Mounting pressure on packaging companies to increase their use of post-consumer recycled content (PCR) in the US has the potential to weigh on sector margins because PCR is more expensive than virgin resin. While a jump in PCR demand would benefit solid waste management companies, their recycling investments have been modest to date and are unlikely to accelerate without a stronger push from regulators.

As global issuance of green, social, sustainability and sustainability-linked bonds swings back to growth this year, macroeconomic and market uncertainties and greater scrutiny over perceived greenwashing will temper the pace of recovery.

The US Federal Reserve’s pilot climate scenario analysis is credit positive for participating US banks because it will help identify potential risks and promote the integration of climate risk into their enterprise risk management practices. The Fed exercise is focused on the change in probability of default, loss given default and, where applicable, internal risk ratings, rather than aggregated loss estimates, as are typically the outcome of stress-testing exercises.

ESG issues will come into sharp relief this year as corporate debt issuers grapple with growing scrutiny over their decarbonization plans, social risks intensify and the rules of the road for ESG investments evolve – all in an environment of heightened macroeconomic, financial and geopolitical risks.

Climate change, which is driving more frequent and increasingly severe natural catastrophes, is a growing threat to reinsurers because they accumulate losses from primary companies.

Access and affordability risks will remain elevated, corporate decarbonization pledges will face greater scrutiny, companies will face a complex regulatory landscape and the credit cycle will test issuers' governance capabilities.