Barclays: High-emissions sectors in Asia recognize climate and cyber risks, but disclosures on quantification, investment and governance remain inadequate

Overview

This is the 10th update in the Asia 50 series since its launch in March 2023. Through the lenses of climate physical risks and cybersecurity, the report examines risk identification, disclosure and response execution among large high-emissions companies in Asia. It concludes that companies have broadly incorporated these risks into their strategies, but disclosures on asset exposure, financial losses, adaptation investment and cybersecurity governance effectiveness remain incomplete.

Core views

The report regards climate physical risks as a key credit and sustainable-investing issue for high-emissions sectors in Asia. From 1970 to 2024, extreme weather in Asia caused US$2.27 trillion in economic losses, with floods and storms as the primary drivers; asset-intensive sectors such as energy, utilities and transportation are particularly exposed. Among Asia 50 companies, 92% acknowledge the materiality of physical risks and incorporate them into climate strategies, with floods, extreme heat, storms and water stress the most frequently identified risks. However, only 56% identify vulnerable assets, and although TCFD-style scenario analysis is relatively widespread, quantification of financial impacts remains limited. Disclosed impacts are generally in the low-single-digit percentage range of EBITDA, but Jindal Steel's cumulative losses in 2025-2030 equal 14% of EBITDA, while J-Power's cumulative losses equal 83% of EBITDA. In responding to climate risks, the report categorizes corporate measures into four types: engineering, operational, planning and information, and nature-based solutions. Forty Asia 50 companies disclose relatively detailed adaptation measures, with process improvements the most common, followed by operational and engineering measures; around 30% of companies mention related innovation. Forty-two percent disclose the use of climate insurance, but no company discloses coverage or premiums. Although companies identify adaptation measures, dedicated adaptation capital expenditure or operating expenditure is rarely quantified separately and is often included in broader climate or environmental budgets. The report notes that companies account for only 5% of adaptation and resilience funding flows in Asia, which may explain the low transparency around related capital expenditure; the low-single-digit EBITDA losses observed are also broadly consistent with another study's range of revenue losses of 0.9%-5.9%. The report considers cybersecurity an often-overlooked risk in high-emissions sectors that is rapidly taking on systemic implications. AI-driven attacks have increased the scale and complexity of threats: cited data indicate that AI-enabled attacks rose 89% year-on-year in 2025, average eCrime breakout time shortened to 29 minutes, with speed improving 65% year-on-year, and the fastest attack taking only 27 seconds. From June 2025 to June 2026, 15,205 security incidents were recorded in Asia-Pacific, of which 40% involved data breaches and 36% involved phishing and ransomware. Among Asia 50 companies, 78% identify cybersecurity as a material risk and 72% disclose incident-management processes, but 44% do not explain ultimate accountability arrangements; only 24% disclose incident data, including disclosures confirming no incidents, and only 18% disclose employee training metrics. The report believes that certifications, third-party audits and AI-specific cybersecurity strategies can improve investor visibility, but fewer than half of companies disclose these items, while cyber insurance penetration in Asia remains low. Among companies covered by credit research, POSCO Holdings strengthened physical-risk identification and assessment after flooding at the Pohang steel plant in September 2022. The incident caused 135 days of production disruption, at a cost equivalent to 14% of FY2021 operating profit. In 2023, the company established a business continuity plan covering disaster prevention, damage recovery, alternative production and market protection, and disclosed estimated asset losses of 1%-5% from abnormal weather and no more than 1% from other physical-risk events, although transparency around adaptation capital expenditure remains insufficient. Its cybersecurity is managed and reported by a designated CISO, supported by third-party IT security audits and supplier risk assessments; however, disclosures on incidents, certifications and detailed employee training data still need improvement. POSCO Holdings' 2Q26 EBITDA rose 15% year-on-year, driven by infrastructure and rechargeable battery materials businesses, with moderate improvement expected in 3Q26 and further acceleration in growth in 4Q26; POSCO operating profit rose 17% quarter-on-quarter to KRW403 billion but fell 34% year-on-year, while Krakatau POSCO operating profit fell 57% year-on-year to US$10 million. The report expects improved credit metrics for POSCO Holdings and POSCO in 2H26 to ease Moody's rating pressure, but considers Krakatau POSCO's fallen-angel risk to have increased following its second-quarter results. From a relative-value perspective, the report recommends switching from POHANG '31s into POINTL '31s. POSCO International is POSCO Holdings' principal trading and energy division and recorded its highest quarterly and first-half operating profit, supported by higher natural gas prices and volumes as well as contributions from its newly acquired Indonesian palm oil business. After crossing bid-ask spreads, the switch offers 27bp of yield compensation in exchange for one notch lower in rating and a maturity extension of less than six months; the report estimates that the one-notch rating difference is worth around 8-9bp and the maturity extension around 5bp. LG Chem provides more complete physical-risk quantification: it discloses average annual losses and loss ranges in 2030 and 2050 under four climate scenarios. Under the extreme SSP5-8.5 scenario, expected annual asset losses from drought and water stress could exceed 10% in both 2030 and 2050, while the probable maximum losses from river flooding and pluvial flooding could approach 20% by 2050. However, its adaptation measures are primarily engineering, operational and process measures, and it does not disclose dedicated adaptation capital expenditure. In cybersecurity, LG Chem discloses IT security-specific employee training data, ISO 27001 certification and third-party audits, but provides limited disclosure of incident numbers, types and severity. The company's 2Q26 EBITDA rose 26% year-on-year to KRW2.2 trillion, although one-off inventory gains in its petrochemicals business and wider product spreads were key contributors; inventory gains are expected to reverse in 3Q26, while LG Energy Solution's earnings are expected to strengthen in 4Q26. The report believes LG Chem's net leverage is above rating agencies' downgrade thresholds, and S&P may reassess its rating in 2027 if 2H26 improvement is insufficient. The report recommends buying LGENSO '31s, '35s or '36s. LG Energy Solution has around 310GWh of capacity, making it one of the world's largest non-Chinese battery manufacturers, and believes it has the largest local battery capacity in North America, enabling it to meet customer demand for sources that are not foreign entities of concern. The report believes it will benefit from AI data-center demand for power solutions. Its bond curve is the widest among Korean high-grade corporate bonds and is also wide relative to the BBB-rated machinery and equipment curve; the '31s, '35s and '36s are around 20-30bp wider than that curve, with the '31s offering the greatest yield compensation. The report believes that around 10bp is sufficient to reflect its mid-BBB downgrade risk, given Baa2 stable/BBB negative/unrated ratings. As of 2023, KEPCO had invested KRW7.2 trillion in climate adaptation, demonstrating relatively high transparency in execution investment, but its disclosure of physical-risk assessments and potential financial costs is less comprehensive than that of POSCO Holdings and LG Chem. The company emphasizes protecting power-grid infrastructure, but corporate-level disclosures on cybersecurity accountability, training, certification and audits are weak. Its 2Q26 operating profit fell 48% year-on-year to KRW1.1 trillion because extended nuclear-unit maintenance lowered utilization and necessitated coal substitution, raising fuel costs while revenue remained flat; if Middle East disruptions keep energy prices elevated and the Korean government freezes utility rates for the full year, the 2H26 outlook will be challenging. Its net debt/EBITDA is 5.3x, and pressure on margins together with sustained high capital expenditure could cause leverage to rise further, but due to its strategic importance, its ratings remain aligned with the Korean sovereign at Aa2/AA/AAall stable. As Korea National Oil Corporation should benefit from higher energy prices while KEPCO is more vulnerable without tariff relief, the report recommends switching from KORELE 4.125% '30s into KOROIL 4.75% '30s; spreads are comparable after crossing bid-ask spreads, while maturity is shortened by more than seven months.

Analysis framework

The report first conducts a cross-sectional comparison of Asia 50 companies' awareness, disclosure and execution regarding climate physical risks and cybersecurity, then assesses transparency gaps using risk events, scenario losses, insurance and capital expenditure disclosures. It subsequently combines climate and cyber resilience practices with recent earnings, leverage, rating pressure and relative bond spreads for Korean companies under credit-research coverage to form individual bond trading views.

Methodology notes

• (Methodology not in vocabulary)

  TCFD-style climate scenario analysis and financial quantification of physical risks

  The report compares how companies identify asset exposure and estimate losses under different climate scenarios, measuring potential financial impacts as a percentage of EBITDA or asset losses.

• Fixed Income and Credit AnalysisSpread analysis

  Comparison of bond spreads, rating notches and maturity compensation

  By comparing spreads relative to bond curves, rating differences and maturity changes, the report assesses yield compensation for trades involving POINTL, LGENSO and KOROIL.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• POSCO Holdings / POSCO / Krakatau POSCO

  The report uses the three companies to illustrate climate and cyber resilience practices and divergent credit performance.

  Strengths

  POSCO Holdings has established a business continuity plan, conducts facility physical-risk assessments, and has a CISO, third-party IT audits and supplier risk assessments.

  Weaknesses

  POSCO Holdings lacks transparency around adaptation capital expenditure; Krakatau POSCO's earnings have weakened.

  Comparison

  POSCO Holdings and POSCO improved earnings in 2Q26, while Krakatau POSCO's operating profit fell 57% year-on-year.

  Risks

  Krakatau POSCO faces heightened downgrade and fallen-angel risk; gaps remain in POSCO-related climate and cybersecurity disclosures.

• LG Chem / LG Energy Solution

  LG Chem provides more comprehensive climate scenario quantification; LG Energy Solution is viewed as a potential beneficiary of growing AI data-center power demand.

  Strengths

  LG Chem discloses multi-scenario loss assessments, IT security training, ISO 27001 certification and third-party audits; LG Energy Solution has around 310GWh of capacity and a North American local-capacity advantage.

  Weaknesses

  LG Chem does not disclose dedicated adaptation capital expenditure and has limited cybersecurity incident disclosure; its petrochemicals business faces reversal of inventory gains in 2H26.

  Comparison

  LGENSO bonds are around 20-30bp wider than the BBB machinery and equipment curve.

  Risks

  LG Chem's net leverage exceeds rating agencies' downgrade thresholds, and its rating pressure may transmit to LG Energy Solution.

• KEPCO / Korea National Oil Corporation

  The report recommends switching from KEPCO-related bonds into Korea National Oil Corporation bonds, which should benefit from higher energy prices.

  Strengths

  KEPCO had invested KRW7.2 trillion in climate adaptation as of 2023 and has strategic importance; Korea National Oil Corporation should benefit from higher energy prices.

  Weaknesses

  KEPCO has insufficient disclosure of physical-risk costs and cybersecurity governance, while earnings and leverage are under pressure.

  Comparison

  Both are rated in line with the Korean sovereign; after crossing bid-ask spreads, the switch has similar spreads and shortens maturity by more than seven months.

  Risks

  If energy prices remain elevated and there is no tariff relief, KEPCO's operating pressure may persist in 2H26.

Key data

• Economic losses from extreme weather in AsiaUS$2.27 trillionCumulative losses from 1970-2024, driven mainly by floods and storms.
• Share of Asia 50 companies confirming the materiality of physical risks92%Physical risks have been incorporated into climate strategies.
• Share of Asia 50 companies identifying vulnerable assets56%Disclosure at the asset or project level remains insufficient.
• Share of Asia 50 companies identifying cybersecurity as a material risk78%72% disclose incident-management processes.
• Share of Asia 50 companies disclosing cybersecurity incident data24%Includes disclosures confirming that no incidents occurred.
• Impact of POSCO flooding135 days of production disruption; equivalent to 14% of FY2021 operating profitFlooding at the Pohang steel plant in September 2022.
• LG Chem 2Q26 EBITDAKRW2.2 trillionUp 26% year-on-year.
• KEPCO net debt/EBITDA5.3xThe report believes leverage could continue rising amid pressure on margins.

Impact & implications

The report believes that risk management priorities in Asia's high-emissions sectors are expanding from emissions-reduction targets to adaptation to climate shocks and cyberattacks, but corporate disclosures remain insufficient for investors to fully assess asset vulnerability, financial losses and response investment. For credit investors, the report considers resilience and disclosure practices alongside earnings, leverage, ratings and relative bond value, and presents specific bond-switching or purchase ideas.

Risks

• Insufficient quantification of asset exposure and financial impacts from climate physical risks may limit assessment of companies' actual losses.
• Disclosure of dedicated adaptation capital expenditure, operating expenditure and climate insurance coverage details is limited.
• AI-driven cyberattacks are accelerating, while corporate disclosure on incidents, accountability, training, certification and audits is uneven.
• LG Chem may face rating reassessment risk if it fails to improve in 2H26.
• If energy prices remain high and tariffs are frozen, KEPCO's earnings, leverage and credit profile may remain under pressure.
• Krakatau POSCO needs to improve earnings and reduce debt to ease rating pressure.

What to watch

• Whether Asia 50 companies expand disclosure of vulnerable assets, financial impacts of physical risks and dedicated adaptation capital expenditure.
• Whether companies disclose cybersecurity incidents, ultimate accountability, employee training, certifications, third-party audits and AI-specific strategies.
• Credit-metric improvement at POSCO Holdings and POSCO in 2H26, as well as Krakatau POSCO's earnings and deleveraging progress.
• LG Chem's earnings improvement in 2H26 and rating agencies' assessment of its leverage and ratings.
• KEPCO's operating and leverage performance amid energy prices, tariff policy, nuclear utilization and high capital expenditure.