Sovereign credit ratings under threat from climate change?

Watching the Tides - Marchel Alexandrovich

Here at Saltmarsh Economics much of our work is focused on climate change and its impact on economic activity and policy. To bring together this analysis, two years ago we launched our Saltmarsh Economics Climate Index (SECI), which scores and ranks countries on their ability to absorb climate change risks. In all, we now cover every economy which is part of the IMF’s database, 116 countries in total. The SECI combines a wide range of variables across two broad categories of macro data. The first category relates to the physical and transition risks associated with climate change. The second category aims to capture the ability of economies to absorb these risks and to withstand the shock.

When we started to develop our framework, we drew a clear distinction between climate risk and traditional ESG (Environmental Social Governance) methodology. Doing the ‘right’ thing on S and G is important, but in our work we put significantly more emphasis on emissions and on climate damage function…