Global warming will pressure sovereign credit ratings throughout this century with poorer, lower-rated countries hardest hit, Standard & Poor's (S&P) Ratings Services said in a report. S&P said climate change will be the 21st Century's second global "mega-trend", after ageing populations, to put downward pressure on sovereign ratings, which could harm economic growth and government coffers.
The report said extreme weather events such as typhoon Haiyan, which killed more than 5,000 people in the Philippines late last year, seem to have been on the rise since the early 1980s but none have so far caused S&P to revise its rating of any country. "We have taken a view that the size of devastation, while large in absolute terms, has not been sufficient to impact a rating overall," S&P said in a statement to the report published Thursday.
"However, assuming that extreme weather events are on the rise in terms of frequency and destruction, how this trend could feed through to our ratings on sovereign states bears consideration," S&P said. S&P ranked the 116 countries it rates for climate vulnerability, with all of the 20 most vulnerable in emerging markets. Cambodia, Vietnam and Bangladesh occupied the bottom three spots.
"Their vulnerability is in part due to their reliance on agricultural production and employment, which can be vulnerable to shifting climate patterns and extreme weather events, but also due to their weaker capacity to absorb the financial cost," it said. The 20 least-vulnerable nations were all advanced economies, led by Luxembourg, Switzerland and Austria. Nearly 200 governments agree that deep cuts in greenhouse gas emissions are needed by mid-century to ensure global temperature rises are kept below the 2-degree Celsius level. UN-backed scientists say that is needed to prevent a huge increase in droughts, flooding and rising sea levels. Under the UN, countries are aiming to sign a binding global climate pact next year to oblige all nations to curb emissions from 2020.
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