Moody's: the risks of net-zero promises

The international integrated risk assessment firm, Moody’s, has gained insight into the future risks for carbon-intensive businesses, as the rush to reach net-zero continues. 

Based in New York and with a revenue of $417m, Moody’s is integrated across 40 countries and like all businesses, has been forecasting the future and the impact of popular net-zero promises.

What are the risks?

Carbon-intensive businesses are expected to present increased credit risks for lenders. This will lead to ‘A reduced availability and increased cost of capital for fossil fuel projects’ in the next few years.

"We expect pressure to inexorably rise for major producers and users of hydrocarbons to adjust business strategies to implement credible transition plans," said James Leaton, the senior vice president at Moody's Investors Service. "We expect the impact will be more significant than the limited effect to date of patchwork policy implementation, gradual changes in disclosure requirements or moves by investment funds to reduce their fossil-fuel holdings. However, the full implications for this decade of such initiatives will only become clear with the detail, breadth and speed of implementation steps taken under the net-zero initiatives."

As many businesses and industries make the necessary moves towards net-zero, centuries-old practices will have to change and newer ones will take over, with all the modern advantages. 

What are carbon intensive businesses? 

The most obvious contenders of a carbon intensive business include those involved in:

• Electricity and heat production 25%
• The agriculture industry 24%
• Transport (from cars to freighter ferries) 14%

Yet, the rising popularity of bitcoin is also leaving a significant carbon footprint. Bitcoin is a digital currency which can be brought, sold or traded. Its one modern advantage is that it is a currency without a bank, bitcoin can simply be traded between users. Bitcoins are formed through mining coins on computers via long calculations. As the number of bitcoins grows, it takes more time to mine them and thus more electricity. 

The international cryptocurrency could have a carbon footprint as large as London, according to Alex de Vries, a Dutch economist. But currently, bitcoin uses enough energy to match the Republic of Ireland.