Nations that pollute the least are among the most vulnerable to disasters and face the highest barriers to the financing they need to protect themselves. As climate impacts worsen, already towering debt loads, finance costs and poor sovereign credit ratings could enforce a ¡°vicious cycle¡± for developing countries, according to new research.
Fitch Ratings this month published an analysis suggesting that small countries prone to extreme weather and fossil-fuel exporters may face the highest sovereign risks from climate change in coming years.
A new tool for analysis ¡ª called Climate Vulnerability Signals ¡ª scores sovereign credit on a 100-point scale, based on both physical risks and ¡°transition risks,¡± or economic sensitivity to declining fossil-fuel use and high clean-tech costs. Of 119 countries analyzed through 2050, 60 had scores high enough to suggest that they were at risk of a credit downgrade by 2050, according to the report. That would make it harder for them to borrow to finance projects that protect against climate change and speed the energy transition.
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