Feeling the heat: climate risks and the cost of sovereign borrowing

Beirne, John / Nuobu Renzhi / Ulrich Volz
External Publications (2021)

in: International Review of Economics & Finance (76), 920-936

DOI: https://doi.org/10.1016/j.iref.2021.06.019

This paper empirically examines the link between the cost of sovereign borrowing and climate risk for 40 advanced and emerging economies. We find that vulnerability to the direct effects of climate change matters substantially more for sovereign borrowing costs than climate risk resilience. Moreover, the magnitude of the effect on bond yields is progressively higher for countries deemed highly vulnerable to climate change. Finally, a set of panel structural VAR models indicate that the reaction of bond yields to climate risk shocks become permanent after around 18 quarters, with high risk economies experiencing the largest permanent effects on yields.

About the author

Volz, Ulrich



Further experts

Aleksandrova, Mariya

Climate risk governance 

Bauer, Steffen

Political scientist 

Brandi, Clara

Economy and Political Science 

Dippel, Beatrice


Donnelly, Aiveen

Politcal Science 

Ekoh, Susan S.

Environmental Research 

Goedeking, Nicholas

Comparative Political Economy 

Gudibande, Rohan


Hilbrich, Sören


Hägele, Ramona

Political Scientist 

Iacobuta, Gabriela

Climate and sustainable development policy 

Lehmann, Ina

Political Science 

Malerba, Daniele


Mathis, Okka Lou

Political Scientist 

Never, Babette

Political Scientist 

Pegels, Anna


Schiller, Armin von

Political Science 

Sommer, Christoph


Srigiri, Srinivasa Reddy

Agricultural Economist 

Walle, Yabibal

Development Economics