Published on 8 August 2023
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Study estimates the increasing cost of debt caused by climate change

Published in the journal Management Science, the study is the first to anchor climate science within ‘real world’ financial indicators.

A team of economists at UEA and Cambridge used artificial intelligence to simulate the economic effects of climate change on Standard and Poor’s (S&P) ratings for 108 countries during the next 100 years to show that climate change will increase the cost of sovereign and corporate debt worldwide.

“We find material impacts of climate change as early as 2030, with significantly deeper downgrades across more countries as climate warms and temperature volatility rises.”

“From a policy perspective, our results support the idea that deferring green investments will increase costs of borrowing for nations, which will translate into higher costs of corporate debt.”

Dr Patrycja Klusak, Associate Professor in Banking and Finance at University of East Anglia and an Affiliated Researcher at Bennett Institute for Pub

Media coverage

Bloomberg, BQ Prime, Business Plus, Business Standard, Business World, Down to Earth, Economic Times, FS Sustainability, Financial Times, Money Control, MSN, NDTV, Reddit, Responsible Investor, Reuters, The Economic Times, The Environment, The New Indian Express, The Week, Responsible Investor, WIONews

Press release: Study reveals the increasing cost of debt caused by climate change

Published paper: Rising Temperatures, Falling Ratings: The Effect of Climate Change on Sovereign Creditworthiness

The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.

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