Bapon (SHM) Fakhruddin, PhD

Water and Climate Leader| Strategic Investment Partnerships and Co-Investments| Professor| EW4ALL| Board Member| Chair- CODATA TG| Award Winner (SDG 2021, EWS 2025)

Climate Change and Sovereign Credit Ratings in a Warming World

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Bapon Fakhruddin

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Do sovereign credit ratings adequately reflect the risks posed by climate change?

Climate change has become a critical factor in determining sovereign credit ratings, as evidenced by research spanning 124 countries over two decades. The study reveals that physical risks, such as higher temperature anomalies and natural disasters, are directly linked to lower sovereign credit ratings, particularly after the Paris Agreement of 2015. Additionally, transition risks associated with moving to a low-carbon economy have begun to influence credit assessments, with countries showing ambitious CO2 reduction targets and actual emission reductions receiving more favorable ratings.

The research findings demonstrate that countries heavily dependent on fossil fuels and those with high debt levels tend to receive lower ratings post-Paris Agreement, while nations rich in transition-critical materials like lithium and rare earth elements are seeing positive rating impacts. This has significant implications for global financial stability and policy-making, emphasizing the need for integrated climate risk assessment in sovereign ratings, support for vulnerable nations, and enhanced international cooperation to ensure a just transition to a sustainable economy. The evidence clearly shows that climate change risks are increasingly material to sovereign creditworthiness, requiring coordinated action from governments, financial institutions, and the international community.

The paper link here https://lnkd.in/gQiTyYfT

#climatechange #sovereigncreditratings #physicalrisk #transitionrisk #greentransition #financialstability #sustainableeconomy #carbonemissions #naturaldisasters #climateresilience #globalfinance #debtmanagement #fossilfuels #renewableenergy #economicpolicy #climateaction #investmentdecisions #greenfinance #climaterisks

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About the author

Dr Fakhruddin is an expert climate change risk assessor with 18 years’ global experience in working on disaster risk and climate resilience projects. This experience is a major advantage in climate change adaptation and mitigation strategy development. His key areas of expertise are climate and multi-hazard risk assessment, disaster preparedness, early warning and emergency response and coastal community resilience. He has designed climate change and disaster response projects more than 25 countries in Asia and the Pacific. During his career, Dr Fakhruddin helped to design major international multi-hazard early warning systems for floods, cyclone and tsunami to save life and property damage. His most high profile work has been developing multi-hazard warning systems including a tsunami warning system for Indian Ocean countries following the deadliest one in history – the 2004 Boxing Day Tsunami. Dr Fakhruddin is currently work as a mentor and supervisor for postgraduate study in disaster risk management in University of Auckland (UoA). He is a Science Committee Member of IRDR of ICSU/UNISDR, Co-Chair for the Disaster Loss DATA and Risk Interpretation and Applications (RIA) Working Group of IRDR of ICSU/UNISDR. He is also Co-Chair CODATA task group Linked Open Data for Global Disaster Risk Research (LODGD) and PSG member of the Coastal Inundation Forecasting Demonstration Project (CIFDP) and Open Panel of Commission for Hydrology Experts (OPACHE) of WMO. Recently Dr Fakhruddin appointed by the Government of New Zealand to develop national climate change risk assessment framework