Oil companies will continue to heighten their credit risk, if they fail to keep pace with investors’ expectations for transitioning to a low carbon business model, Moody’s reportedly said on Friday.
Reuters quoted the rating agency as saying that the credit risk of major oil firms increased with recent events.
Moody’s said, “The increasing potential for ever more stringent investor climate- and emissions-related investment thresholds are likely to lead to higher capital costs and diminished access to capital for oil companies that do not keep pace with investors’ expectations for transitioning to a low carbon business model.”
Citing recent developments, it noted that the Royal Dutch Shell was losing a Dutch climate lawsuit this week while Exxon was losing a battle with shareholders.
Chevron also lost a vote to shareholders demanding it cut emissions further.
The rating agency was also quoted as saying, “These actions represent a substantial shift in the landscape for oil companies, which had previously prevailed in courts, and largely fend off significant shareholder votes, on climate-related matters.”
Moody’s also considered Exxon losing board members to an activist hedge fund over its energy transition strategy.
This most important development would “likely presage similar results in future board elections at other United States oil companies,” it added.
