Sustainability Quarterly

Welcome to the latest edition of the S&P Global Sustainability Quarterly, our first of 2023. The physical hazards of climate change are rising in severity and frequency, and countries and companies around the globe are setting net-zero targets in a bid to meet the goals of the Paris Agreement and limit the damage from climate change. But some impact will be unavoidable, and it will not be evenly distributed. An S&P Global Ratings analysis of data from 190 countries shows that a one-time, 1-degree C annual average temperature increase is more damaging for emerging markets and developing economies than for advanced economies.

Mitigation is only one piece of the solution to the climate change puzzle. The World Economic Forum’s Global Risks Report for 2023 lists failure to mitigate and failure to adapt to climate change as the top two risks over the next decade. But research from S&P Global Sustainable1 shows that many large companies are not engaging in climate adaptation efforts.

Adaptation financing also remains a challenge, lagging far behind money going toward mitigation. Issuance of green, social, sustainability and sustainability-linked bonds could contribute to addressing that gap. As analysts from S&P Global Ratings write in our annual sustainable bond outlook, the focus on adaptation and resilience is likely to increase. This demand could be a source of growth for the sustainable bond asset class in 2023 and beyond.

The urgency is clear. The physical impacts from climate change are increasing, and the window of opportunity for building resilience and adapting at lower costs is rapidly closing. The physical risks caused by climate change are driving calls for faster preparation and for adaptation finance to be mobilized to pay for it.