Mitigating and Managing the Effects of Climate Change on Macrofinancial Stability and Sovereign Risk

Climate change can negatively affect macrofinancial stability and amplify sovereign risk. By raising the cost of sovereign borrowing for climate-vulnerable countries, it limits the fiscal space available for scaling up investment in adaptation and resilience to climate change and can threaten debt sustainability. This policy brief proposes actionable policy solutions for mitigating and managing the effects of climate change on macrofinancial stability and the cost of sovereign borrowing.

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