Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322390 
Year of Publication: 
2025
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 453
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
Climate change poses a major risk to financial stability by affecting sovereign credit risk through transition and physical risks. Using data from 52 developed and developing countries over two decades, the study finds that transition risk leads to higher sovereign yields, especially in developing and high-emission countries post-Paris Agreement. Physical risks, such as temperature anomalies, generally aren't priced in, but high debt levels amplify yield increases during acute climate events. Medium-term projections show varied sovereign yield responses to different climate disasters, with the effects differing by income level and fiscal space, highlighting the complex financial impact of climate change.
Subjects: 
Climate risk
sovereign risk
transition risk
temperature change
natural disasters
JEL: 
C23
E62
H63
Q54
Document Type: 
Working Paper

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