For more information, visit esg.moodys.io

ESG Incidents: 2023 in Review

ESG Incidents Sector Exposure
NUMBER OF ACTIVE CASES IN 2023

Long term trends around inflation, societal polarization and digitalization continue to drive the prevalence of social incidents. As in2022, Banks, Financial Services and Software sectors appear as the most exposed to ESG Incidents

Banks & Financial Services

682

ENVIRONMENTSOCIAL

GOVERNANCE

Environmental Incidents account for 22% of all incidents identifiedin 2023 with cases related to climate change and biodiversity rising.

Historically, Social Incidents are the most common type ofincident accounting for 70% of new cases identified in 2023

Governance Incidents related to Corruption, Anti-Competitionand Privacy appear common in Finance and Technology sectors.

TOTAL NUMBER
OF NEW INCIDENTS
PER ANNUM

Software & IT Services

4800
Mining & Metals

3,181

436

2,603

Specialized Retail

2,399

413
Telecommunications
1,569

1,568

1,657

1,489

1,605

1,631

341

1,388

1,285
917

992

906

1,081

Energy

1,214

300

1,026

855

825

750

752

Food493
476

425

2015

Trendsto watch

353

303

2016

2017

2018285397

2019

2020

2021

2022

2023

ARTIFICIAL INTELLIGENCEDATA BREACHESCUSTOMER PRESSURE

As A.I tools come to the fore, stakeholders
are raising concerns over their safety andgovernance. We identified 22 cases in 2023
related to A.I.

As more or our working and social lives takeplace online – breaches of corporate andpersonal information are rising. We identified
78 cases related to data breaches in 2023.

Product and service disputes (528), customer
relation concerns over prices and contract
terms (720) were amongst the most prevalent
incidents identified in 2023.

Automobiles

283
Travel & Tourism

278
Chemicals263

All data comes from Moody's Analytics' ESG Incident Database as of January 2024

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For more information, visit moodys.com/coronavirus

Top 10 sectors most affected by COVID-19*

Then & Now: the number of speculative grade corporate
issuers pre-COVID-19 was significantly higher versus
pre-2008 credit crisis
Q4 200754%

increase in 2019speculative grade
rated issuer countvs. 2007

46%

583

176

178

BaCaaServices: Consumer

27
52
Auto1 sector
performance
will shape global growth
due to high interconnectedness
AaaAaACa

investment grade to speculative grade

Media: Diversified & Production

32

Aerospace & Defense

31

1,063

Ridership rebounding slower than jobs; multiple
factors impeding return to normal service-2.7%

25 Increase in B3s
MAY heightens market's
2019 vulnerability to a

Metals & Mining~30% of total
corporate rated
universe

Investment
Grade:

86

11%

FallenAngels:AMER

Carnival Corporation

new default cycle

Automakers & Part Suppliers

09
SEP
2019

VIEW REPORTAs low-rated spec-grade
universe expands, more
rated companies will
likelyUtility
default or&bedowngradedin theInfrastructurenext downturn29 Loan and bond
OCT convergence: investors
2019 pave way for lower

AFV growth will drive
VIEW REPORT
demandfor powerand capex$337 BNEMEA$209 BN35

of total IG
rated population

Rising number ofbatteriesin AFVs
Systems
Limitedwill
drive demand for cobalt,
nickel and copper
APAC
Assets Management Co., Ltd.

recoveries innext downturn

R

VIEW REPORT

05SEP
2019

Apache Corporation
Gap, Inc. (The)Macy's, Inc.
Michael Kors (USA), Inc.

30%

Rated debt outstanding
Current weak credit
09 Global CLOs – in a severe
13
quality could fuel Caa
SEP downturn scenario, credit NOV
issuers’ defaults in2019 quality declines
2019next downturn
significantly, impairing
junior tranches
VIEW REPORTR

About 1% of companies across all rating categories were under review for downgrade at the end of November, about
the same at 1% at the end of October and 8% at the end of April. An additional 30% had negative outlooks.

AFV growth will slow
demand for dieseland gasoline

Media & Telco

Technology$1,434 BN

34%

17%

R

32%

Base case 2020

Base case 2021

16,309 K
11,410 K
13,406 K-1.4%-15% J Jobs % recovered
7%

37% ChinaR
7%

E. Europe

Argentina/Brazil

India

3,105 K
2,018 K
2,321 K3,528 KJ K
2,470
2,964 KJ

25,769 K
23,200 K
23,780 K

53%

NY MTA
Chicago Transit Authority
Los Angeles County MTA
WMATA
MBTA
SEPTA
Japan San Francisco MTA
5,129 KBART
4,360 KMARTA
4,665 KDenver RTD

Number and growth rates represent Moody’s forecast for Light Vehicle Registrations.

30%

Auto sector has significant impact on global economy

Public health concerns

Rising use of digitalsystems will spur demandfor chips and software$977 BN
Rated debt outstanding

WorkforceJ%
43%8.3%
3.8%J 6.1%
US 52% EU
Japan J

60%

J Manufacturing %

30%
17.7%
US14%
EU J

44%

21.6%
Japan

Exports %

J

9.4%

US44%

0%

2019
9.9 billion

-52%

2020*
4.7 billion

28%

2021
6.0 billion

23%

2022*
7.4 billion

20%

2023*
8.9 billion

FaresTaxes

Federal aid

Down 53%
in 2020

Down 5.7%$25B one-time2020 stimulus

30%

21%

12.6%
EUSUBURBS

22%* = ProjectedTemporary and permanent remote work...but large costs will contribute toslow return to financial stability

Japan Access to alternate transportation

Salaries & benefits

Potential transit capacity limits

Fixed costs (pensions, etc)

Potential service cuts

System operations

Recovery is calculated as the number of jobs/riders added since
the trough in April through September as a percentage of thenumber of jobs/riders lost from January to April.

CITYTransit riders being
locked in due to low
income and lack ofalternate transport

Long-term migration andusage trends that could
reshape mass transit

Aggregate US transit ridership

Slow job recovery in key sectors

Remote schools and universities

Subway riders movingto suburbs andbecoming rail riders

Facility maintenanceCapital projects

Traffic congestion
will push people
back onto masstransit

Increased car usage
in certain cities

Suburban riders
moving further out
and become 2x per
week rail riders

COUNTRY

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, allinformation contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality andfrom sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify orvalidate information received in the credit rating process or in preparing its Publications.

16%*Impeding factors

Global exports totaled $1.3 billion

Rated debt outstanding

Key revenues

Year-over-year% change

Top ten issuers by ridership numbers

J

4,115 K3,292 K3,951 K

Ridership will grow in 2021...

R Ridership % recovered

-8.2%
-10%
-11.8% R 2.5%
-30%
20% 31%

24%

R18%

15%

10%

17,100 K
J12,825 K
14,900 K

R-20%
20%

9%
R

W. Europe*Includes all publicly-rated nonfinancial corporate entities; excludes subsidiaries and project USfinance-related corporations

Oil & Gas

Rated debt outstanding

VIEW REPORT

0.9%-30%
17.5%R

-4.4%
-35%
R 15%

The top 10 ways
loan investors areforfeiting protections

2019 actual

VIEW REPORT

Exhibit does not include DIC Corporation (APAC) or Wirecard (EMEA) because these ratings have been withdrawn.

$1,300 BN

-1.2%
-25%
16.2%

$1,587 BNCompany
LimitedRated debt
outstanding

Connectivity will drive
demand for bandwidth,
offsetting 5G investment

To learn more, read the report

The coronavirus pandemic will continue to hurt mass transit systems’ financial performance across the United States.
Lockdowns, unemployment,
remotetoworking,office closuresand slowdowns
in the retail and leisure industries have led toAuto sales unlikely
reach pre-crisis
level before
mid-2020slarge drops in ridership, which will not approach pre-pandemic levels for many years.

Late cycle reports highlighted corporate credit stress prior to COVID-19

ZF Friedrichshafen AG

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORYPURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

US mass transit: ridership faces a long, slow recovery

Calculation reflects percentage of corporate families with at least one downgrade since March 1. Some corporate families include multiple
issuers and some issuers have received multiple downgrades. Percentages reflect current number of issuers in each sector; ratings withdrawn
since 1 March 2020 are excluded.

Total downgrades

38%

34

Fundamental auto trends, including stricter emissions regulation, autonomous driving
andareconnectivity,
lead to increasing number of touchpoints with other industries.
entities that move fromFALLEN ANGELS IN DETAIL “Fallen Angels”

Mar 1 – Nov 30, 2020of total SG
rated population

35
For more information, visit moodys.com
35

RetailRecent downgrades represent a small percentage of the total non-financial corporates rated universe*

942

40

Consumer goods: Durable

Baa

88% increase in
B-rated issuers vs. 2007

44

Energy: Oil & Gas

B

37%

Speculative Grade
Investment Grade54

Automotive

Investment Grade91

Speculative
Grade:

56

Transportation: Consumer

942

Speculative Grade

121
63%65Advertising, Printing & Publishing

Total # of downgrades per category, Mar 1 – Nov 30, 2020

Proportion of publicly
rated issuers by category

66%Mar 1 – Nov 30, 2020

% DOWNGRADED WITHIN SECTOR

Hotel, Gaming & Leisure

Majority of downgrades within speculative grade*Q4 2019

Proportion of publicly
rated issuers by category

SECTOR© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

The spread of the coronavirus has placed significant stress on the global economy, but corporate
downgrades reveal a thorough and measured approach to credit during turbulent times.

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

Non-Financial Corporates: Rating Activity During COVID-19

Younger riders return
to cities for reduced
rent, social / work
opportunities

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