Department of Economics & Centre for Sustainable Finance

Climate change and the cost of capital in developing countries


This project represents the first systematic effort to assess the relationship between climate vulnerability, sovereign credit profiles, and the cost of capital in developing countries.

Climate risks are multi-dimensional, covering a range of geophysical, social, and economic issues. The intensification of these risks and the degree to which they are accurately priced by financial markets are of increasing concern to global economic stability.

This collaborative research project with Imperial College Business School was commissioned by United Nations Environment Programme and received financial support from the MAVA Foundation.

The resulting report was launched on 2 July 2018 with a presentation of the main research findings, a keynote and panel discussion. The report was also presented at the African Development Bank, the Asian Development Bank and the World Bank’s 'Understanding Risk Finance' Pacific Forum in Port Vila, Vanuatu.

The research findings have been widely reported on in the media, including coverage by the Financial TimesReuters and Forbes. See also an opinion piece by Ulrich Volz and Bob Buhr for IPE magazine (Climate Change Mitigation is a Good Investment) and a piece published by the Asian Development Bank's Asia Bond Monitor (Climate-Vulnerable Developing Economies Face Rising Cost of Debt).

The report’s findings were referred to in a Ministerial Communique after a meeting of the Ministers of Finance of the Vulnerable Twenty Group (V20) at the Annual Meetings of the World Bank Group and International Monetary Fund in Nusa Dua, Bali, in October 2018. The V20 Finance Ministers further discussed the report’s findings at the Spring Meetings of the World Bank Group and International Monetary Fund in April 2019 and announced in a press release new financial instruments in collaboration with international partners to ensure continued global economic growth in the face of increasing threats from climate change.

The implications of the research were discussed in a July 2019 London Climate Action Week event on 'Scaling Up Low-Carbon and Resilient Investment in the Face of Climate Vulnerability' that was jointly organised by the SOAS Centre for Sustainable Finance, the V20 and the Munich Climate Insurance Initiative.


Read the full report here: Climate Change and the Cost of Capital in Developing Countries.

The executive summary of the report is available here in the following languages:

Find out more details in the technical background paper: Climate Vulnerability and the Cost of Debt (2018). Kling, Gerhard, Yuen, C Lo, Murinde, Victor and Volz, Ulrich. 

For additional questions about the project please contact Ulrich Volz.