Climate vulnerability, as measured by indices such as ND-GAIN, is increasingly reflected in sovereign credit risk assessments and borrowing costs. Countries with lower adaptive capacity and higher exposure to climate risks tend to experience wider sovereign bond spreads relative to US Treasuries, indicating a higher risk premium demanded by investors. This relationship demonstrates that financial markets are internalizing climate adaptation and resilience factors when pricing sovereign debt. The resulting variation in sovereign spreads underscores the financial materiality of climate risk and highlights the importance of climate resilience for maintaining favorable access to capital in global markets.
ND-GAIN Score vs. Sovereign Spread (10Y, % over US, 2025)
This bubble chart plots each country’s climate vulnerability (ND-GAIN score, x-axis) against its sovereign bond spread over US Treasuries (y-axis, percentage points). Bubble size is proportional to GDP (USD billions), and color encodes geographic region.
A lower ND-GAIN score indicates higher climate vulnerability. The chart demonstrates that countries with greater climate vulnerability (lower ND-GAIN) generally face higher sovereign risk premia, as reflected in wider spreads. This relationship suggests that financial markets are increasingly incorporating climate adaptation capacity into sovereign credit risk assessments. GDP scaling allows for the visualization of economic weight alongside risk and vulnerability.
Top 10 Sovereign Spreads (2025, % over US)
This horizontal bar chart ranks the ten countries in the dataset by their sovereign bond spread over US Treasuries, but omits country labels on the axis to reduce clutter. Instead, country names and spreads are revealed via tooltips on hover.
The chart highlights that countries with higher climate vulnerability and/or weaker macro-fiscal fundamentals (e.g., Egypt, Nigeria, Bangladesh) command the highest risk premium. The visualization enables rapid identification of outliers and facilitates comparison of sovereign risk pricing across emerging and developing economies.
Data Sources
- ND-GAIN 2022 scores: Quantify national climate vulnerability and readiness, with higher scores indicating greater resilience and adaptive capacity.
- Sovereign bond spreads (May 2025): Calculated as the difference between each country’s 10-year government bond yield and the US 10-year Treasury yield, reflecting market-perceived sovereign credit risk.
- GDP (2023, USD billions): Provides economic context for each country’s risk profile.