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Rich Nations Lagging on Climate Goals May See Higher Bond Yields

  • Countries with lower carbon emissions incur cheaper debt costs
  • Climate risks have different impact on developing countries

Climate risks are already playing a key role in determining the value of government bonds, with developed nations that fall behind on green goals facing higher borrowing costs, new research shows.

Countries with reduced carbon emissions incur lower risk premiums on sovereign debt, as do developed economies willing to rely less on earnings from natural resources, according to a joint study by the University of Technology Sydney and two asset management firms. Those that boost renewable energy consumption also benefit.