Firstly, whether investments exclusions matter, and secondly, what the role is of rating agencies in climate mitigation. We believe that the downgrade is a very clear sign of the basic dynamics of climate-focused investing in fixed income.
First, investors not wanting to take on exposure to coal makes it difficult to access the capital needed for the coal entities through the primary market effect.
Second, this also illustrates a traditional role for credit rating agencies to operate in the climate transition. It may not be the direct risks of physical events or even policy changes that drive credit ratings downwards due to climate risks, but the risks around refinancings.
Finally, this highlights the recursiveness (and power) of fixed income climate engagement. A lack of refinancing drives credit ratings downwards, which again increases funding costs.