Climate change, debt and COVID-19

This study provides an analysis of the linkages between multi-hazard exposure, lack of resilience, resulting disaster risk with related loss and damage, sovereign debt risks, and the lack of investment into resilience building. The COVID-19 pandemic has come on top of the climate crisis, the existential threat of our time. Debt is pushed to new heights at a moment when debt levels were already historically high. This triple climate change, debt and COVID-19 crisis has catalysed a situation where vulnerable nations are being squeezed between financial, economic, climate and health risks. Neither can they afford huge investments in recovery programs, nor can they invest in resilience at the levels required to reduce their future risks. As a result, not only sovereign debt but also climate-induced loss and damage will further rise, with vulnerable frontline communities paying the highest price. 

Results reveal that each country’s risk profile is unique, due to very specific national circumstances, which is why their respective recovery strategies should be specific, too. Ethiopia is exposed to the highest climate, COVID-19 and other disaster risks. Nevertheless, the relative loss and damage risk is highest in PNG, closely followed by Lao PDR. The debt risk is highest in Sri Lanka, followed by El Salvador; it is currently lowest in PNG. The multiple risk is highest in PNG and Lao PDR. These results indicate that links between the different types of risk are complex and that it is worth taking a nuanced approach in assessing a specific country’s risks. The information provided by this approach can be used as an early warning instrument. The approach allows for the identification of specific risk drivers, the measurement and comparison of the severity of risks and the identification and prioritisation of areas where risks should be reduced.