This article shows that, even though the broader credit market and bond spreads are yet to systematically incorporate the impact of climate policies or the potential for physical climate risk, these risks can have a material impact on the asset value of firms, and that the downside risk is large enough to adversely affect bondholders and other creditors of firms. The authors hope this article will encourage bond investors to take a more active role, along with equity holders and policymakers, in spurring firms onward in the transition to a low-carbon economy.