The impact of climate vulnerability on firms’ cost of capital and access to finance

Kling, Gerhard; Volz, Ulrich; Murinde, Victor; Ayas, Sibel

doi:10.1016/j.worlddev.2020.105131

Cited by 143 publications

(84 citation statements)

References 19 publications

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“…Over time, there is a risk that a worsening of climate change and associated macroeconomic impacts will further undermine public finances. Moreover, greater climate vulnerability is also holding back the development of the private sector (Kling et al, 2021). The poorer countries in the region face the risk of not being able to finance necessary adaptation measures and, without external support, ending up in this vicious circle of greater vulnerability and worsening public finances and perpetual debt crises.…”

Section: Conclusion and Discussion Of Policy Implicationsmentioning

confidence: 99%

“…Following Beirne et al (2020), the two climate change indicators of interest comprise a measure of vulnerability to climate change and a measure of resilience to climate change. The former is based on a refined version of the ND‐GAIN vulnerability index that was developed by Kling et al (2021), comprising 20 indicators for vulnerability of food and water supply, health, ecosystems, habitat, and infrastructure (Table A2). It excludes components from the original ND‐GAIN index developed by Chen et al (2015) that are highly correlated with macroeconomic variables, so that this vulnerability index is less correlated with countries' financial or economic conditions, which might cause endogeneity 9 .…”

Section: Empirical Analysis Of the Impact Of Climate Risk On Sovereign Bond Yieldsmentioning

confidence: 99%

“…6 6 In a related study, Kling, Volz, Murinde, and Ayas (2021) use firm‐level data and find that climate change vulnerability also affects the cost of corporate financing and access to finance, controlling for various firm‐specific and macroeconomic factors. …”

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confidence: 99%

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Bracing for the Typhoon: Climate change and sovereign risk in Southeast Asia

Beirne

Renzhi

Volz

2021

Sustainable Development

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This article investigates and empirically tests the link between climate change and sovereign risk in Southeast Asia. Southeast Asian countries are among those most heavily affected by climate change. The number and intensity of extreme weather events in the region have been increasing markedly, causing severe social and economic damage. Southeast Asian economies are also exposed to gradual effects of global warming as well as transition risks stemming from policies aimed at mitigating climate change. To empirically examine the effect of climate change on the sovereign risk of Southeast Asian countries, we employ indices for vulnerability and resilience to climate change and estimate country‐specific OLS models for six countries and a fixed effects panel using monthly data for the period 2002–2018. Both the country‐specific and the panel results show that greater climate vulnerability appears to have a sizable positive effect on sovereign bond yields, while greater resilience to climate change has an offsetting effect, albeit to a lesser extent. A higher cost of debt holds back much‐needed investment in public infrastructure and climate adaptation, increases the risk of debt sustainability problems, and diminishes the development prospects of Southeast Asian countries.

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Section: Conclusion and Discussion Of Policy Implicationsmentioning

confidence: 99%

Section: Empirical Analysis Of the Impact Of Climate Risk On Sovereign Bond Yieldsmentioning

confidence: 99%

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Bracing for the Typhoon: Climate change and sovereign risk in Southeast Asia

Beirne

Renzhi

Volz

2021

Sustainable Development

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“…Furthermore, disclosures are, paradoxically, likely to undermine climate adaptation instead of supporting it. Countries with higher climate vulnerability are already facing a higher cost of borrowing (see Kling et al 2018Kling et al , 2021. As climate-related events become more frequent and severe, the disclosure of physical risks will deteriorate the situation: it will make the financial sector even more reluctant to provide finance to countries that have the highest need to spend on climate adaptation.…”

Section: The Wsc Climate Policy Tools For the Global Southmentioning

confidence: 99%

The Wall Street Consensus in pandemic times: what does it mean for climate-aligned development?

Dafermos

Gabor

Michell

2021

Canadian Journal of Development Studies / Revue canadienne d'ét

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The COVID-19 pandemic has reinforced the dominance of what Daniela Gabor calls the Wall Street Consensus (WSC) as the hegemonic approach to sustainable development. Public commitments to "green recoveries" and climate resilience, growing fiscal deficits in the Global South, and new central bank emergency liquidity measures have created more space for WSC policies. We examine the key WSC climate policy toolsclimate infrastructure as an asset class, climate rescuer of last resort, disclosure of climate-related financial risks and carbon pricingand argue that these will increase financial vulnerability in the Global South while doing little to achieve climate-aligned development. RÉSUMÉLa pandémie de COVID-19 a renforcé la prééminence de ce que Daniela Gabor appelle le Consensus de Wall Street (CWS) en tant que stratégie de développement durable. L'engagement public à soutenir la "régénérations verte" et la résilience climatique, le déficit fiscal croissant des pays du Sud, et les nouvelles mesures d'urgence de la banque centrale pour les liquidités ont créé plus d'espace pour les stratégies du CWS. Nous examinons les outils clés du CWS à l'usage de la politique sur le climatl'infrastructure du climat comme actif, les derniers recours pour un sauvetage du climat, l'indexation des risques financiers liés au climat et du prix du carboneet démontrons que ceux-ci augmenteront la vulnérabilité financière des pays du Sud, tout en accomplissant peu en termes de développement responsable visà-vis du climat.

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“…Climate finance is a subset of green finance and concerns the provision of funding specifically for climate change mitigation and adaptation activities, which include in particular public funding and the use of private finance in developing countries [16]. The authors' analysis [17] highlights previously underestimated economic costs of change in climate-sensitive developing economies. The results of the analysis suggest that companies in countries with a higher climate risk have higher financing costs and are significantly more financially limited.…”

Section: Financing Climate Changementioning

confidence: 99%

Financing climate change in the conditions of the Slovak agricultural sector

et al. 2021

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Research background: Globalization is a powerful engine of structural changes in national, regional and global economies. Except for positive economic effects, globalization also has negative effects. One of them is the deterioration of the global environmental situation and the ongoing global climate change. Purpose of the article: The paper focuses on the current global financing trends to mitigate the effects of climate change. Generally financial funds come from international, national and regional actors. Governments have a range of funding mechanisms and resources at their disposal. Within the EU, these are the Structural Funds, investment funds and the financing from European Investment Bank. At the national level, it is financial assistance from state budgets and local government budgets. Methods: The paper provides literature review of the possibilities of financing climate change at the national and international level and, using analysis and synthesis, points to future trends and sources of financing climate change. We also analyse the proposal of Common agricultural policy 2021-2027 and effects on Slovak agriculture. European Commission wants member states to use up to 40% of the budget for environmental goods and climate change. Slovakia might have problems to spend the allocation due to the fact, that most of the money will be voluntary schemes. Farmers will have the option to participate. Findings & Value added: Agriculture is seriously exposed to the adverse effects of climate change as agricultural activities are directly depending on climate conditions. The article analyses in detail the possibilities and sources of financing adaptation measures in the Slovak agricultural sector.

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The impact of climate vulnerability on firms’ cost of capital and access to finance

Cited by 143 publications

References 19 publications

Bracing for the Typhoon: Climate change and sovereign risk in Southeast Asia

Bracing for the Typhoon: Climate change and sovereign risk in Southeast Asia

The Wall Street Consensus in pandemic times: what does it mean for climate-aligned development?

Financing climate change in the conditions of the Slovak agricultural sector

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