Moody’s: environmental and social risk impact in Latin America is negative | WORLD

The risk rating agency Moody’s stated in a report that the credit exposure to environmental, social and corporate governance (ESG) risks in Latin America and the Caribbean is negative, but lower than in other regions of emerging markets.

In a report, Moody’s indicated that although the “overall impact” of ESGs in Latin America and the Caribbean “is negative,” there are wide variations within the region, reflecting both the different levels of exposure to these risks in each country and its various capacities to cope with them.

In addition, according to Gabriel Torres, vice president of the rating agency and lead author of the report, while “less than 10% of the countries in the region have credit impact scores that are ‘very highly negative’”, “almost 20% of all rated emerging markets have that score. “

“The ESG credit impact scores for Latin American and Caribbean countries denote lower exposures to environmental risks and comparatively higher income levels, elements that increase resistance to ESG risks relative to other regions,” explained Torres. .

Regarding environmental risks, Moody’s noted that almost all countries in the region are “moderately exposed,” but vulnerability increases in the Caribbean, with its many small island economies exposed to hurricanes and rising sea levels.

In general terms, climate risk is the most relevant environmental credit exposure factor for Latin American and Caribbean countries, while issues such as the carbon transition affect a small number of oil-exporting economies in the region.

On the other hand, the report indicates that exposure to social factors is mostly negative in Latin America and the Caribbean, “reflecting a history of inequality” and “unsatisfied social demands.”

“High levels of income inequality, weak labor markets and lack of access to basic and health services are key credit concerns that have been exacerbated by the pandemic of COVID-19”, Says the report.

According to the rating agency, “countries like Chile, Colombia and Peru face high social demands and have experienced protests and political unrest in recent years driven by the inability of governments to address these demands effectively.”

Regarding credit exposures related to governance, these “show a high variation, which reflects the different institutional arrangements in the region”.

According to the report, governance-related credit exposure scores range from “positive” in the Cayman Islands and Chile, to “very highly negative” in Argentina, Ecuador and Nicaragua.

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