Climate Vulnerability Signals

Climate Vulnerability Signals from Fitch Ratings reflect Fitch’s industry-expert credit analysts’ views on the relative vulnerability of entities’ financial profiles to a stress scenario incorporating climate-related risks. With a focus on the long-term outlook to 2050, Fitch considers the impact of a realistic stress scenario incorporating likely policy actions required for governments to limit global warming to below two degrees Celsius (2°C).

Fitch’s analysis extends to 2050 but also provides milestone assessments from 2025. The higher the sector or entity Climate.VS at a particular point in time, the greater the vulnerability under the scenario. A sector with a Climate.VS of 90 in 2050, for example, is expected to face an existential threat from climate risks by 2050 under the scenario, whereas one with a Climate.VS of 10 is expected to experience little or no disruption and may even see benefits. Fitch provides signals in a time series to 2050 to compare the relative vulnerability of sectors and entities at different stages in the transition. The core stress scenario is the UN Principles of Responsible Investment Inevitable Policy Response Forecasted Policy Scenario. Fitch believes its focus on policy provides a realistic assessment of the risk to financial profiles from climate to corporate debt issuers.