Developing countries face additional interest payments of up to US$ 168 billion (€145 billion) over the next ten years as a result of climate change, according to research released today.
The study from the London-based Centre for Climate Finance and Investment is the first systematic effort to quantify the relationship between climate change, sovereign credit profiles and the cost of capital in a sample of developing countries.
It found that, over the past decade, vulnerability to climate change has already raised the cost of debt by 117 basis points, translating to more than $40 billion in interest payments on government debt.
The research also found that when higher sovereign borrowing rates are included in the cost of private external debt, the figure reaches $62 billion across both the public and private sectors.
“This breakthrough study illuminates the need to deal with the increased cost of capital to the world’s most climate vulnerable countries resulting from our success in getting financial markets to take climate risk into account,” said Selwin Hart, the ambassador of Barbados to the US.
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