In the run-up to COP 26, reconciling the competing national agendas towards the global climate crisis remains a challenge. Understanding of the potential economic and financial risks, in the event of a disorderly transition or no transition at all, could be useful.

In this condensed version of the "Anticipating the climate change risks for sovereign bonds" research series, we estimate the economic and financial impacts of transition and physical risks in the 25 countries of the World Government Bond Index (WGBI) universe:

  • The magnitude of the estimated economic impacts is very high—how soon its impact will become economically significant? Tens of GDP percentage points are at risk from both transition and physical risks by 2050 in the most vulnerable economies.  
  • Due to the divergence in fiscal capacity, countries most likely to be affected economically by climate change would not necessarily be those that would incur the highest financial loss. Why?
  • Review the results to see the benefits of an orderly transition to the development of sustainable economic and financial activities.