Fitch proposes change in its approach to identifying climate risk vulnerability

Credit rating firm, Fitch, has unveiled a proposal to "support consistency and transparency" in the way its credit rating process identifies and addresses vulnerability to climate risks.

In a report, Climate Vulnerability in Corporate Ratings, Fitch said it would use its existing sector-level Climate Vulnerability Scores to form the basis for identifying entities that were potentially vulnerable to climate-related risks. They would then be subject to additional analysis in its credit rating committees.

Fitch said the proposed new approach was "intended to ensure that relevant climate risks, which we expect to increase in prominence over coming years, are consistently captured and considered. With this proposed approach, Fitch does not intend to artificially inflate the importance of climate," the agency said.

Fitch assured that it would not expect any issuers to experience changes in their rating resulting from the implementation of the proposal. "It does not reflect a change in how we analyse climate risks in relation to our Corporate Rating Criteria," Fitch said.

To gather evidence on whether to go forward with its proposal, Fitch said planned to implement, on a trial basis, the entity level Climate Vulnerability screener in its credit ratings and the proposed disclosures in its Rating Reports, along with a request for feedback, following the release of this report.