Malaysia is Among Hardest-Hit Countries That Will Suffer Climate-Induced Downgrades by 2030

By Karissa Lund  •  23 Mar 2021 in News

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According to Malaysiakini, a new algorithm-based study by a group of UK universities has predicted that 63 countries – roughly half the number rated by the likes of S&P Global, Moody’s and Fitch – could see their credit ratings cut because of climate change by 2030.

The research also shows Malaysia is among the hardest hit countries that include China, Chile, and Mexico, which could see six notches of downgrades by the end of the century.

Researchers from Cambridge University, the University of East Anglia and London-based SOAS looked at a “realistic scenario” known as RCP 8.5, where carbon and other polluting emissions continue rising in coming decades.

They then looked at how the likely negative impact of rising temperatures, sea levels and other climate change effects on countries’ economies and finances might affect their credit ratings.

 

“We find that 63 sovereigns suffer climate-induced downgrades of approximately 1.02 notches by 2030, rising to 80 sovereigns facing an average downgrade of 2.48 notches by 2100… Our results show that virtually all countries, whether rich or poor, hot or cold, will suffer downgrades if the current trajectory of carbon emissions is maintained,” the study released last week (18 March) said.

The study also estimated that as rating cuts usually increase countries’ borrowing costs in international markets. The climate-induced downgrades would add US$137-US$205 billion to countries’ annual debt service payments by 2100.

“There are caveats, there are no scientifically credible quantitative estimates of how climate change will impact social and political factors. Thus, our findings should be considered as conservative,” the paper said.

You can read the full research, here.