Ratings agency Moody’s has identified US$11tn in rated debt as being “highly exposed” to either carbon transition risks or physical climate threats.

A total of US$6.1tn across a range of sectors is exposed to physical climate risks like extreme heat, flooding or rising sea levels, while US$4.9tn is exposed to carbon transition risk, including policy, legal, technology and market changes, the company says.

While impending mandatory climate disclosures are set to improve the analysis of credit risk, Moody’s notes in its ESG sector report, published yesterday, that the additional data “may in turn raise reputational and financial risks for companies in highly exposed sectors” if they are perceived as doing too little in response.

“We have found that companies with the highest exposure to carbon transition risks tend to be the least transparent regarding transition plans,” says Rebecca Karnovitz, vice-president and senior credit officer at Moody’s Ratings.

A raft of new reporting requirements are due to enter into force this year, including the EU corporate sustainability reporting directive (CSRD), which will include around 50,000 companies versus the 11,000 captured by current requirements, according to the EU’s estimates.

Earlier this month, the US’ Securities and Exchange Commission (SEC) released its rules standardising how public companies should make climate-related disclosures to investors, while California’s climate corporate data accountability act and climate-related financial risk act will require firms operating in the state to report their scope 1, 2 and 3 emissions.

Both sets of regulations are subject to lawsuits that could change the requirements companies ultimately have to fulfil.

The Shanghai, Shenzhen and Beijing stock exchanges have also released draft guidelines for large listed companies to report on ESG issues from 2026, Moody’s says.

The Moody’s report adds that mandatory disclosure could raise reputational and financial risks for companies in high-risk sectors, with small, unlisted companies representing a “blind spot”.

“Limited reliability of borrower disclosure from small and medium-sized enterprises and privately owned companies has constrained banks’ assessment and reporting of their exposure to climate risks,” Karnovitz says.

Karnovitz adds that as more jurisdictions adopt the International Sustainability Standards Board’s disclosure standards, “interoperability and standardisation will increase”.

The report also touches on the likely financial burden of compliance, citing figures from the European Financial Reporting Advisory Group which finds that large listed companies will see additional costs of around €320,000 per year once the CSRD has been phased in.

In the US, the SEC estimates the annual costs of complying with its disclosure rule could range from less than US$197,000 to over US$739,000, averaged over the first 10 years to take into account higher initial costs.