Green finance – New tool for corporate bond credit analysis

A new tool for financial institutions to incorporate water risk in corporate bond credit risk analysis, unveiled on 8 Sept 2015, shows that several beverages, mining and power companies are significantly exposed to water stress.

Seven financial institutions from Europe and the Americas – UBS, Robeco, Calvert Investments, Pax World, J Safra Sarasin, Banorte and Bancolombia – took part in the tool’s development through a partnership between the Natural Capital Declaration (NCD), the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and the German Association for Environment and Sustainability in Financial Institutions (VfU). Simone Dettling, who manages the Emerging Markets Dialogue on Green Finance at GIZ, states: “Water scarcity and droughts are already affecting companies across the world – from California to Sao Paulo and Chile, from South Africa to India and China. For corporate bond markets, this means that uncertain water supplies can directly affect the credit risk of corporate issuers, especially in the mining, power and food and beverage sector.”