Greek businesses’ transition towards the green economy is facing challenges. According to a survey conducted by Deloitte Greece, businesses are facing a significant increase in credit risk as they make the transition. A group of experts from Deloitte’s Climate & Environmental Credit Analytics of Risk Advisory embarked sough to assess the impact of this transition on 821 large Greek enterprises. These enterprises, with an annual turnover of over 20 million euros in 2021, represented 96 sub-sectors of the economy.
The heart of the matter lies in the Network for Greening the Financial System (NGFS) and its three alternative scenarios. These scenarios, like three different paths through an uncharted waters, hold the key to the future of these enterprises.
The first scenario is the “orderly transition,” where things progress smoothly like a well-choreographed dance. The second, the “disorderly transition,” conjures images of turbulent waters and uncharted territory. Finally, the third scenario, the “hothouse world,” sounds ominous and brings a sense of urgency to the whole exercise.
The main conclusion of this test is that the “disorderly transition” presents a formidable challenge, leading to significantly higher credit risk compared to the “orderly transition.”
The stakes are high, as demonstrated by the alarming increase in PDs (probabilities of default). Under the disorderly scenario, PDs skyrocket by 2.8 times (that’s a whopping 180 per cent increase) compared to their current levels, reaching t+18 in 2039.
Under the orderly scenario, PDs rise by 88 per cent, reaching t+12 in 2033, making it a more promising path for these courageous enterprises. Under the “non-action scenario,” the transition risk seems dormant, but lurking in the shadows are the worsening natural risks, waiting to be reckoned with.
Certain sectors face the brunt of these challenges. The energy, mining, construction, and transport sectors find themselves in the spotlight, as they are the carbon-intensive sectors, battling for survival amidst the changes.
As these Greek enterprises embark on a journey towards a greener future, they must tread carefully to minimize credit risks and embrace the opportunities that lie ahead. The fate of their financial landscape rests on the choices they make.
Source: AMNA