In an article published in Sustainable Views on 17 September 2026, discussing how banks’ credit-risk models can favour higher-emitting companies and leave low-carbon projects facing higher financing costs, Rémy Estran-Fraioli, CEO of Scientific Climate Ratings, highlighted the distinction between a company’s exposure to transition risk and its conventional credit risk, while stressing the need for policy measures to improve the financeability of decarbonisation projects:

“Rémy Estran-Fraioli, chief executive of Scientific Climate Ratings, a climate risk tool venture of the EDHEC Business School, and chair of the board at the European Association of Credit Rating Agencies, says the findings are, however, unsurprising.

“Many companies at the forefront of the transition can still have relatively modest or volatile cash flows, high refinancing requirements, technology and execution risk, or significant dependence on regulation and subsidies,” he tells Sustainable Views. “A green company can have very little transition risk and still have substantial credit risk.

“Oil majors, utilities, mining companies, chemical groups or large industrial companies can have substantial emissions while also benefiting from strong [core profits], established market positions, diversified revenues, tangible assets, access to capital markets and decades of operating history,” Estran-Fraioli continues.

“All of these characteristics can translate into a relatively low conventional probability of default. There is no contradiction in saying that a carbon-intensive company can be highly exposed to transition risk while having a very low probability of default over the next 12 months,” he adds.

(…) “The key role of policy is to change the underlying economics to make decarbonisation projects sufficiently profitable and predictable to be bankable,” says Estran-Fraioli. “The study shows the limits of expecting banks or prudential risk models to substitute for climate policy. Banks can be very powerful amplifiers of the transition, but they cannot replace transition policy”.“

📖 Read the full article here.