Significance of COP28 for Credit Markets

The 2023 United Nations Climate Change Conference, COP28, holds significant implications for credit markets, particularly due to its timing as a midway point of the Paris Agreement. The conference is attended by countries globally, where they negotiate climate action, with decisions potentially impacting climate-related credit for rated issuers. Key sectors such as oil and gas, and electric utilities are identified as having substantial exposure to carbon transition risks, representing nearly $5 trillion in rated debt. Additionally, over $6 trillion in rated debt across multiple sectors is vulnerable to physical climate risks, highlighting the urgent need for governments to implement effective policies following their commitments.