Countries could soon feel the effects of climate change on their credit ratings, Standard and Poor's, an international credit rating organization, warned in a new report. Bangladesh, Vietnam, Senegal, and Luxembourg may be worst-hit by changing climatic conditions affecting their ability to finance expenses.
Climate change and aging populations are two of the "global mega-trends" detailed in the report. Economic growth is likely to be negatively impacted by rising global temperatures, the report noted. Aging populations are a problem countries will need to face over the next decade or longer, according to the report.
"The impact of aging societies is already being felt in several advanced economies, most notably Japan, and will steadily increase through the next few decades. For most [nations], their demographic profile is such that the full impact of aging on economic performance and public finances will be felt from the mid-2020s or soon after," S&P economists wrote in their report.
Demographic changes, like aging societies, is easier to predict than climate change, the reported noted. Complex patterns in climate models can make predictions of future conditions problematic. Study by the Intergovernmental Panel on Climate Change (IPCC) suggest winters in northern Europe could rise between three and ten degrees Fahrenheit by the year 2100.
The report noted that Austria and Switzerland were least at risk from these two trends affecting their ability to borrow money.
"Unlike in the case of aging, individual societies cannot by themselves meaningfully reduce the impact they will feel as the climate changes. This is the global collective action problem... A society may choose to reduce its carbon emissions unilaterally to reduce the risk of the potential consequences of global warming, but due to the global character most of the benefits of that society's sacrifice will accrue to other nations, the group wrote in their report.
Extreme weather events have been on the rise since the 1980's, authors noted in the study. This includes megastorms, like typhoon Haiyan, which killed over 5,000 people in the Philippines in 2013.
Almost 200 nations have no agreed that serious reductions in the release of greenhouse gases will be required to keep global climate change within acceptable levels. Environmentalists believe without such reductions, storms and flooding may become more severe, while droughts strike other areas. These conditions could seriously impact human crops and communities.
The ratings group has not yet downgraded the credit rating of any nations over population aging or climate change. However, they predict declining credit ratings in less-advantaged countries will help drive income inequality across the globe.