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September 28, 2021

Moody’s 2021 Climate Week NYC Briefing: Getting finance fit for net zero

Last week, on September 23, we held our sixth annual NYC Climate Week briefing. With over 1,000 registrants from 71 countries, the event brought together a global audience to explore the role of the financial industry and financial markets in enabling the transition to a net-zero future. Moody’s climate experts, alongside leading voices from the world of finance and business, highlighted the power of data and analytics and the need for shared solutions in building a more resilient, sustainable economy and society.

Here’s a quick summary of the event. A link to the replay is also included below.

Collaborative action was identified as a critical theme during the discussions. Moody’s CEO Rob Fauber opened the event by calling for collective action to define transition risks and readiness on the path to next zero; ensure economy-wide accountability and transparency; and unlock finance for resilience and adaptation. Reflecting the importance of shared efforts, Moody’s earlier announced its participation in the Net Zero Financial Services Provider Alliance, part of the Glasgow Financial Alliance for Net Zero. As a founding member, Moody’s commits to align relevant products and services to achieve net-zero greenhouse gas emissions by 2050, in addition to reducing its own operational emissions.

The UN’s High-Level Climate Action Champion at COP26, Nigel Topping, joined Moody’s Brian Cahill to discuss how applying a system lens and engaging in radical collaboration can galvanize the momentum needed for economy-wide transformation. For instance, by harnessing ambition loops, setting exponential goals and following shared pathways, we heard how the automotive sector is well on its way to electrifying its products and decarbonizing supply chains.  

While significant efforts will be needed in all sectors to get close to net zero emissions targets, the credit implications of carbon transition will not be uniform. Credit analysts from Moody’s Investors Service discussed how technological developments across some sectors – such as power and autos – are providing solutions at scale to decarbonize, while harder-to-abate sectors are likely to face more fundamental challenges to align themselves with a low-carbon future.

Translating long-term net-zero commitments into tangible short-term targets came through as a critical consideration for market practitioners.  During a panel moderated by Moody’s Emilie Mazzacurati, we heard that investors are not as confident when companies set long-term net-zero targets without interim strategies. According to our audience survey results, 31% of those polled cite lack of transparency as the greatest shortcoming of corporate commitments on emissions, followed by lack of comparability and lack of link to real-world effects (both 27%) and lack of credibility (15%). Best practices for organizations include engagement with investors and adoption of science-based methods to set interim targets and strategies.

Figure 1: Audience poll - What is the greatest shortcoming of emissions commitments for your purposes?
Data as of September 23, 2021.
Sources: Moody’s

Finally, we discussed the potential of debt capital markets to scale the finance required to realize our next-zero ambitions. Moody’s welcomed Sean Kidney, CEO of Climate Bonds Initiative, to discuss the role of sustainable bonds in enabling transition finance and facilitating greater dialogue between investors and issuers. The panel assessed the role of innovative structures, such as sustainability-linked bonds, to better link companies’ capital plans to corporate commitments – an instrument debuted by NRG Energy in North America last year. And in the commercial real estate market, we learned how the financial sector can use modeling from companies such as Helios Exchange and Moody’s to build green building portfolios that can be incorporated into green bond frameworks.

Listen to the replay