Countries in Asia, Middle East and North Africa (Mena) and small islands are most exposed to rising sea levels and different studies yield similar results, says Moody’s in a report.
Countries including Vietnam (Ba3 negative), the Bahamas (Baa3 stable), Egypt (B2 stable), Suriname (B2 stable) and some in the Gulf are highlighted, with up to 10 per cent-25 per cent of the population or GDP exposed, says the Moody’s in the report titled “Sovereigns – Global: Sea level rise poses long-term credit threat to a number of sovereigns”.
In absolute terms, the largest populations exposed are in Asia, including Bangladesh (Ba3 stable), China (A1 stable), Indonesia (Baa2 stable), and India (Baa2 negative). Some high-income economies, such as Japan (A1 stable) and the Netherlands (Aaa stable), also feature. Island sovereigns are not always in scope, but analyses of “locked-in” sea level rise in particular highlight the Cayman Islands (Aa3 stable), Maldives (B2 negative) and Fiji (Ba3 stable), with 80 per cent or more of the population exposed.
Credit implications are wide-ranging. The economic and social repercussions of lost income, damage to assets, loss of life, health issues and forced migration from the sudden events related to sea level rise are immediate. The main credit channels for sovereigns are economic and fiscal strength.
Vulnerability to extreme events related to sea level rise can also undermine investment and heighten susceptibility to event risk, by hindering the ability of governments to borrow to rebuild, increasing losses for banks, raising external pressures, and/or amplifying political risk as populations come under stress. While one isolated shock related to sea level rise is unlikely to materially weaken a sovereign’s credit profile, repeated shocks could do.
Increase in frequency, severity of sea level-related disasters and effectiveness of adaptation will determine rating implications Through our assessment of exposure and credit impact, we find that Vietnam, Egypt, Suriname and a number of small islands face material credit risk. The extent of risk will be determined by the pace of increase in the frequency and severity of natural disasters related to sea level rise, which is currently highly uncertain, and by the effectiveness of adaptation measures, so far largely untested. -- Tradearabia News Service