How Developing Countries Reduce the Impact of Climate Vulnerability on Sovereign Risk

January 21, 2025  

By Oscar Valencia, Jose E. Gomez-Gonzalez and Jorge M. Uribe. 

Imagine living in a country where storms, floods, or droughts can cause catastrophic damage to the livelihoods of thousands or even millions of people, undermining a country’s ability to grow and maintain its macroeconomic stability. This is the challenge facing several developing countries all over the world, especially in Latin America and the Caribbean (LAC). The connection between climate risks and a country’s fiscal situation might not seem obvious, but it is consequential. When investors perceive a country as vulnerable to climate change, borrowing costs for that country goes up—sometimes significantly.  

https://blogs.iadb.org/gestion-fiscal/en/climate-vulnerability-sovereign-risk/