Scientific Climate Ratings, an EDHEC Business School venture, has launched the Sovereign Climate Risk Ratings.

The ratings aim to capture the impact of physical climate risk on GDP enabling investors, asset managers and banks to put a price tag on sovereign climate risk. They also exhibit subnational granularity whereby national GDP impacts are derived from estimates of gross regional product (GRP), allowing the methodology to capture significant variations within a single country.

Sovereign Climate Risk Ratings are calculated at two reference horizons, 2035 and 2050, providing investors with standardised benchmarks for comparing countries over time. Each country receives a letter grade from A to G, with G representing the highest level of exposure.

These grades provide a clear picture of winners and losers. For example, by 2035, the US has an overall grade of E, whereas most of Western Europe has grades ranging from A to C. Much of the African continent will be heavily exposed to extreme temperatures, with grades ranging from D to G. The table below illustrates the range of projected impacts across a selection of major economies, highlighting how exposure can vary significantly even among G20 countries.

Country 2035 impact (%) 2050 impact (%) Sovereign Rating
USA -4.6 -10.4 E
China -3.8 -8.5 C
Russia -0.8 -1.7 A
France -2.6 -5.9 B
United Kingdom -1.8 -4.0 A
Australia -3.8 -8.6 C
Canada -3.4 -7.7 C
Brazil -5.8 -13.0 G
India -4.8 -10.8 E

Rémy Estran-Fraioli, PhD, CEO of Scientific Climate Ratings, said, “Climate change is a global phenomenon, but climate risk is local and financial. Our framework captures the structural, compounding output losses caused by chronic warming at the regional level and aggregates them into sovereign-level impacts. It provides the missing transmission channel between climate warming and sovereign fundamentals, identifying structural exposure before spreads fully adjust.”

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