Economies around the world display a different degree of resilience in the face of global headwinds. Some economies stay afloat despite severe international sanctions. Climate change, in particular global warming, poses a challenge to seemingly advanced Western economies. An increase in average summer temperatures by a few notches presents a threat to their credit ratings, analysts caution.
Experts at the University of East Anglia (UEA) and Cambridge University arrived at the alarming conclusion. Climate change could entail a downgrade in sovereign credit rating in lots of countries. The research on the hypothetic adverse influence of climate change on the economy revealed that climate anomalies might affect almost 59 countries. Their credit ratings could be cut as the least unpleasant consequence.
The research proves the idea that delaying green investment will raise borrowing costs for countries that, in turn, will amplify the cost of money for businesses, Dr Patrycja Klusak, an Associate Professor in Banking and Finance at the University of East Anglia says.
At present, mankind is not able to deal with swelling emissions of carbon dioxide. Countries around the world endeavor to slash CO2 emissions, but no one has come up with a workable solution yet. Perhaps artificial intelligence will help tackle the challenge as it was actively engaged by climate experts. For a start, AI was tuned into the available patterns of S&P ratings. Then, analysts exploited AI in climatic economic patterns and the system of evaluating risks of natural disasters that will be used by the S&P experts in compiling new ratings for various climate scenarios. Having done estimates for the scenario of mounting emissions in the global atmosphere, analysts concluded that the credit ratings of 59 countries could be degraded.
It is common knowledge that emerging markets that frequently represent the economies with poor credit ratings already bear the brunt of the aftermath of climate change. However, Patrycja Klusak affirms that none of the economies will win. Indeed, countries with high credit ratings will certainly suffer the downgrade of their high ratings.
