Credit Rating Agencies are Miscalculating Risks of Climate Change

A new report claims that credit rating agencies such as Moody’s Investors Service and Standard & Poor’s are miscalculating the risks of climate change, which could lead to the next big financial crisis. The paper, released on Wednesday by the Center for International Environmental Law, an advocacy group in Washington DC, claims that much like the 2008 housing crisis, when banks overvalued so-called “subprime mortgages”, credit rating agencies are doing the same thing with fossil fuels like coal and oil. Muriel Moody Korol, senior attorney at Ciel and author of the report, in a statement, "The value of fossil fuel investments in our current dynamic climate change trajectory could deteriorate dramatically just as sub-prime assets became worthless during the credit crisis. As rating agencies inadequately rated assets then, they are likely overestimating the value of fossil fuel assets now.”