S&P Global Ratings believes the decarbonization path for Asia Pacific firms beyond 2030 is highly uncertain, and will be shaped by emerging regulations and new technologies.

The rating agency said in a statement on Monday that the paths to decarbonization, and the credit risks involved for Asia Pacific firms, are similar globally.

Yet, it noted there are challenges and opportunities more specific to Asia-Pacific, such as a heavy reliance on coal chemicals (challenge) and an abundance of state-owned players that can take the lead in decarbonization initiatives (opportunity).

It noted that decarbonization may change companies’ competitive positions, creating differentiation in costs and client perceptions.

It believed that intensifying climate-focused regulation will facilitate industry consolidation and improve industry profitability, benefiting the large players most.

It also said that green financing for the sector looks still underdeveloped, and banks continue to dominate the green financing market.

According to S&P, rated entities in Asia-Pacific are setting achievable carbon goals till 2030, without a material impact on their credit profiles in the next few years.

“Rated entities, mostly large players in the region, are setting similar or more aggressive carbon goals than required by regulation, with firms able to cover their spending on environmental initiatives with cash flows,” said S&P Global Ratings credit analyst Betty Huang.

S&P Global Ratings credit analyst Raymond Hsu, on the other hand, said current decarbonization actions are unlikely to cause a significant increase in firms’ cost structures by 2030, as the cost of renewables drops.

“Nevertheless, risks may rise given the unstable supply from renewables,” he added.

S&P: tech crackdown could boost tech expenses for South and Southeast Asia banks