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Economic Growth, U.S. Energy Policy and the Chinese Economy: a Review as the Year Comes to a Close

S&P Global Ratings

COP24 Special Edition Shining A Light On Climate Finance

S&P Dow Jones Indices

Considering the Risk from Future Carbon Prices

Empowering Public Private Collaboration in Infrastructure

S&P Global

How Can Banks Apply a Quantitative Lens on Climate Risk Exposure


Economic Growth, U.S. Energy Policy and the Chinese Economy: a Review as the Year Comes to a Close

The following round-up captures the views of S&P Global's rating analysts, economists and other key leaders who are sharing their views on the state of the world economy as we near the end of 2017. We've divided it into three parts: the economic outlook (pretty good), China & emerging markets (doing well, but with risks that are possibly being overlooked), and U.S. energy policy (a radical transformation under the first year of the Trump administration.)

Macroeconomics

It's very difficult to get a room full of economists to actually be fairly happy about things. It's the basis for the famous remark attributed to President Harry Truman that he wanted to meet a one-armed economist, who didn't qualify every statement with "but on the other hand..." Of course, you heard a lot of that at the 2017 IIF meeting, but a general optimism was mostly prevalent. It was mentioned more than once that all of the major economies in the world--and many among the emerging economies--were all growing, which is a rarity. Still, quantitative easing is ending in the U.S., it is in its likely final throes in other areas, and the impact of such a big change was in the background of many discussions.

Energy

Of all the areas where federal U.S. policy makes a difference, there might not be a bigger shift in moving from the Obama administration to one headed by Donald Trump than in energy. Whether it's the end of the Clean Power plan, the granting of federal permission for the Keystone XL pipeline or the elimination of many rules affecting production, there has been a 180-degree shift, as one of S&P Global's experts describes it in this video. But that doesn't mean there aren't activities ongoing that will impact the production and delivery of energy in the U.S. Rather, carbon mitigation efforts are being undertaken at the state level that could have a significant impact.

China and Emerging Markets

When a group of international economists gets together, China will always be one of the key topics of discussion. At more recent IIF annual meetings, there had been significant trepidation about the state of the Chinese economy. For example, at both the 2015 and 2016 IIF meetings, the turbulence of the Chinese equity markets and what that said for the state of the country as a whole, was very much front and center. What was remarkable about this year's meeting is that there appeared to be a fair amount of calm surrounding that country. But it's not all smooth; as several of our analysts, economists and other experts note in this video, there is still plenty of reason for concern. In other emerging markets, the news is mostly positive.



Considering the Risk from Future Carbon Prices

Along with the advent of the 2015 Paris Climate Agreement has come a growing understanding of the structural changes required across the global economy to shift to low- (or zero-) carbon, sustainable business practices.

The increasing regulation of carbon emissions through taxes, emissions trading schemes, and fossil fuel extraction fees is expected to feature prominently in global efforts to address climate change. Carbon prices are already implemented in 40 countries and 20 cities and regions. Average carbon prices could increase more than sevenfold to USD 120 per metric ton by 2030, as regulations aim to limit the average global temperature increase to 2 degrees Celsius, in accordance with the Paris Agreement.

S&P Dow Jones Indices launched the S&P Carbon Price Risk Adjusted Indices to embed future carbon price risk into today’s index constituents.

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Watch: Empowering Public Private Collaboration in Infrastructure

S&P Global CEO Doug Peterson speaks with Maha Eltobgy from the World Economic Forum, on their joint study that looks at how greater collaboration between the public and private sector can accelerate national infrastructure programmes.



How Can Banks Apply a Quantitative Lens on Climate Risk Exposure

Aligning with the Recommendations of the Taskforce on Climate Related Financial Disclosures (TCFD)

Dec. 03 2018 — The signals are clear: central banks and regulators are stepping up action to address the potential systemic risks to financial markets that climate change poses.

This means it will become increasingly necessary for banks to develop a deeper understanding of how climate issues could affect their businesses and those they finance. By effectively managing and responding to these issues, banks can not only help mitigate the risks, but also seize the opportunities presented from the transition to a lower-carbon economy. Trucost has worked with banks for more than a decade to support their climate-related analysis. This paper provides practical guidance to help banks manage and report key climate-related metrics, no matter what level of ambition they may have.

This paper is organized into five sections:

I. What is the TCFD Framework?

II. Measuring the Carbon Footprint of a Bank

III. Translating Climate Exposure into Financial Risk

IV. Incorporating Scenario Analysis

V. Creating Opportunities

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