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
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.