The rise in sea levels and corresponding natural disasters carry wide-ranging credit implications for sovereigns, with Vietnam, the Bahamas, Egypt, Suriname and other small island nations at the greatest risk, Moody's said in a report.
Sea levels are likely to continue rising for decades and gradually contribute to a higher frequency and severity of natural disasters like floods, cyclones or storm surges, the report added.
The immediate socio-economic impact of rising sea levels and related natural disasters is characterized by a loss of life, forced migration, lost income, damage to assets and health concerns. This is likely to weigh on the credit profile of certain sovereigns as economic and fiscal strength wanes following such disasters, Moody's wrote.
Additionally, a country's vulnerability to natural disasters in light of rising sea levels could weigh on investment and further increase its susceptibility to event risk, as it may constrain the government's borrowing ability to rebuild. Meanwhile, stress on institutional capacities and the population could lead to higher political risk.
Certain high-income economies such as Japan and the Netherlands are also exposed to the risks from rising sea levels but many of these countries have strong credit metrics and countermeasures in place to prevent a significant credit impact, the rating agency added.