Climate Change and Sovereign Risk
About the Course
This course examines ways climate change affects the cost of sovereign borrowing—the interest rate on debt issued by a central government that determines debt servicing costs. It explains how these dynamics could hinder public investment in climate-resilient infrastructure and broader climate adaptation, exacerbating climate risk exposure and debt sustainability, and explores the example of Southeast Asian economies highly susceptible to the impacts of climate change. It also describes policy solutions for mitigating climate-related sovereign risks and climate-proofing public finances across Asia and the Pacific and beyond.
The course consists of 4 units:
Unit 1: Conceptual Transmission Channels (11 minutes)
Unit 2: Stylized Facts for Southeast Asia (9 minutes)
Unit 3: Estimating the Impact of Climate Change on Sovereign Borrowing Costs (14 minutes)
Unit 4: Mitigating and Managing Climate-Related Sovereign Risks (6 minutes)
- Learn how climate change could impact sovereign borrowing costs
- Develop an understanding of effective policy responses for addressing climate-related sovereign risks
How to Complete this e-Course
- Watch 4 short video lessons
- Review open access reading materials
- Successfully pass quiz with a score of 8/10 or higher
- Answer feedback questions
- Certificate with unique ID will be issued upon completion of course requirements
- Acevedo, S. 2014. Debt, Growth and Natural Disasters: A Caribbean Trilogy. IMF Working Paper No. 14/125. Washington, DC: International Monetary Fund.
- Acharya, V., I. Drechsler, and P. Schnabl. 2014. A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk. The Journal of Finance 69: 2689–2739.
- Adrian, T., J. Morsink, and L. Schumacher. 2020. Stress Testing at the IMF. Monetary and Capital Markets Department. Departmental Paper 20/04. Washington, DC: International Monetary Fund.
- Batten, S., R. Sowerbutts, and M. Tanaka. 2016. Let’s Talk About the Weather: The Impact of Climate Change on Central Banks. Bank of England Working Paper 603. London: Bank of England.
- Bachner, G., B. Bednar-Friedl, and N. Knittel. 2019. How Does Climate Change Adaptation Affect Public Budgets? Development of an Assessment Framework and a Demonstration for Austria. Mitigation and Adaptation Strategies for Global Change 24: 1325–1341.
- Beirne, J., N. Renzhi, and U. Volz. 2020. Feeling the Heat: Climate Risks and the Cost of Sovereign Borrowing. ADBI Working Paper 1160. Tokyo: Asian Development Bank Institute.
- Black, R., S. Bennett, S. Thomas, and J. R. Beddington. 2011. Migration as Adaptation. Nature 478: 447–449.
- Botzen, W. J. W., O. Deschenes, and S. Mark. 2019. The Economic Impacts of Natural Disasters: A Review of Models and Empirical Studies. Review of Environmental Economics and Policy 13(2): 167–188.
- Burke, M., S. M. Hsiang, and E. Miguel. 2015a. Global Non-Linear Effect of Temperature on Economic Production. Nature 527: 235–239
- Burke, M., S. M. Hsiang, and E. Miguel. 2015b. Climate and Conflict. Annual Review of Economics 7: 577–617.
- Chen, C., I. Noble, J. Hellmann, J. Coffee, M. Murillo, and N. Chawla. 2015. University of Notre Dame Global Adaptation Index. Country Index Technical Report. University of Notre Dame.
- Clark, E. 1997. Valuing Political Risk. Journal of International Money and Finance 6(3): 477–490.
- Cuadra, G., and H. Sapriza. 2008. Sovereign Default, Interest Rates and Political Uncertainty Emerging Markets. Journal of International Economics 76(1): 78–88.
- Dasgupta, S., B. Laplante, C. Meisner, D. Wheeler, and J. Yan. 2009. The Impacts of Sea Level Rise on Developing Countries: A Comparative Analysis. Climactic Change 93: 379–88.
- Dikau, S., and U. Volz. 2020. Central Bank Mandates, Sustainability Objectives and the Promotion of Green Finance. SOAS Department of Economics Working Paper 232. London: SOAS University of London.
- Eckstein, D., V. Künzel, L. Schäfer, and M. Winges. 2019. Global Climate Risk Index 2020. Who Suffers Most from Extreme Weather Events? Weather-Related Loss Events in 2018 and 1999 to 2018. Briefing Paper. Bonn, Germany: Germanwatch.
- European Central Bank. 2016. Annual Report 2015. European Central Bank.
- EM-DAT. 2020. EM-DAT – The International Disaster Database.
- Kahn, M. E., K. Mohaddes Kamiar, N. C. Ng. Ryan, P. M. Hashem, M. Raissi, and J.-C. Yang. 2019. Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis. NBER Working Paper 26167. Cambridge, MA: National Bureau of Economic Research.
- Kling, G., Y. C. Lo, V. Murinde, and U. Volz. 2018. Climate Vulnerability and the Cost of Debt. Centre for Global Finance Working Paper 12/2018. London: SOAS University of London.
- Klomp, J. G, and K. Valckx. 2014. Natural Disasters and Economic Growth: A Meta analysis. Global Environmental Change 26: 183–195.
- Pinzón, A., and N. Robins, with M. McLuckie, and G. Thoumi G. 2020. The Sovereign Transition to Sustainability: Understanding the Dependence of Sovereign Debt on Nature. London: Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science, and Planet Tracker.
- Raitzer, D. A., F. Bosello, M. Tavoni, C. Orecchia, G. Marangoni, and J. N. G. Samson. 2015. Southeast Asia and the Economics of Global Climate Stabilization. Manila: Asian Development Bank.
- Schuler, P., L. E. Oliveira, G. Mele, and M. Antonio. 2019. Managing the Fiscal Risks Associated with Natural Disasters. In Fiscal Policies for Development and Climate Action, edited by M. A. Pigato. Washington, DC: World Bank, 133–153.
- Volz, U., J. Beirne, N. Ambrosio Preudhomme, A. Fenton, E. Mazzacurati, N. Renzhi, and J. Stampe. 2020. Climate Change and Sovereign Risk. London, Tokyo, Singapore, Berkeley: SOAS University of London, Asian Development Bank Institute, World Wide Fund for Nature Singapore, Four Twenty Seven.