This report analyses the attempts to study and quantify potential credit risk differentials between green and non-green assets/activities. Stocktakes conducted on this front revealed that there is still limited empirical evidence of ex-post risk differentials.
Given persistent methodological and data-related challenges, conducting risk differential analysis is not a straightforward exercise.
Surveyed financial institutions are turning to other methodologies – and in particular, forward-looking methodologies – for identifying and assessing
climate-related risks.
CRAs’ methodologies with respect to the integration of ESG factors in credit rating and related research findings can help advance the analytical approach towards assessing risk differentials from a more granular and forward-looking perspective.