• Carbon emissions may be linked to credit ratings. Businesses with carbon intensity above the industry average may face higher costs and greater investment requirements to adapt. If these pressures weigh on profitability, cash flow, and debt-servicing capacity, they could ultimately affect the businesses’ credit ratings.
• Our study of companies in the DAX and FTSE 100 found that those with below-average carbon intensity had better credit ratings – particularly in the industrials, consumer staples, and consumer discretionary sectors. This may partly reflect differences in products and manufacturing processes, which result in varying levels of energy use, carbon intensity, adaptation costs, financial positions, and, ultimately, credit ratings across companies.
• If Thailand implements an Emissions Trading System (ETS), businesses that integrate carbon reduction planning with cost and capital management will be better equipped to manage the financial burden. Companies should assess potential increases in carbon costs, required investments in emissions reduction, and the impacts on cash flow and debt-servicing capacity to ensure that the transition does not strain their financial positions or credit ratings.
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