As the effects of climate change are becoming more apparent each day, the need for thorough risk evaluations is increasingly evident as well. However, with climate change affecting so many aspects of our lives, making a comprehensive risk assessment is challenging —even at the national level. Our paper “Who’s most at risk? A global index of climate risk for countries” introduces a novel, multidimensional index that assesses climate risk exposure across more than 170 countries. We carefully identify the main risk factors and calibrate their weights based on the literature and econometric analysis. This approach is markedly different from publicly available climate indices that rely on a large number of factors (“as many as you can find”) which are assumed to be all equally relevant. Our methodology distinguishes between physical risks—including acute events like floods and droughts, and chronic changes such as rising temperatures—and transition risks, which arise from the economic and policy shifts required to move from fossil fuel dependency toward low-carbon systems. Crucially, the index incorporates each country’s adaptive capacity (e.g. governance, fiscal ability, country’s development) and mitigation capacity (e.g. energy efficiency and deployment of renewable energy), thus offering a holistic view of vulnerability.
The scores show that low-income and climate-exposed countries, particularly in the Caribbean, Pacific, Sub-Saharan Africa and South Asia, face the highest physical risks due to limited resilience and high exposure. Meanwhile, high-income and fossil fuel-reliant economies, such as those in the Gulf region, are more vulnerable to transition risks as they confront the costs and complexities of decarbonisation.
The paper’s insights have important implications for policy, investment and international cooperation. They underscore the need for targeted climate finance and risk-informed development strategies, especially in countries with high exposure and low adaptation and mitigation capacity. The index is designed to be a practical tool for financial institutions, investors, policymakers and development institutions, helping them identify priority areas for investments in climate adaptation and mitigation. By quantifying and comparing risks globally, the paper provides a foundation for more equitable and effective climate action, ensuring that support is directed where it is most urgently needed and where it can yield the greatest resilience dividends.
No standard evaluation approach exists
The presented scores are data-driven and reproducible, which allows to trace back a score to the underlying risk drivers. This is particularly relevant for a field where the assessment methods and outcomes are highly divergent and often partial. The few country assessments that are publicly available provide a similar high-level picture when it comes to the regions most exposed to physical or transition risk. However, individual country scores vary widely from one index to another, and even accounting for the different purposes of the indices, the divergence can be large.
This high dispersion across evaluations is not specific to climate change assessments. Berg, Kölbel and Rigobon (2022) investigate the reliability of (non-sovereign) ESG (Environmental, Social and Governance) ratings and their relationship with stock returns. The authors argue that ESG ratings are inherently noisy due to methodological differences across rating agencies, which leads to biased estimates in standard regression analyses. They find that for these ESG ratings, the correlations between ratings from six different institutions are on average 0.54. This is in sharp contrast with sovereign credit ratings which, notwithstanding the different approaches used by the credit rating agencies, have a very high correlation (0.92). The large divergence of climate risk assessments highlights that a good understanding of the underlying methodology is essential when interpreting the results. This in turn underscores the need for transparency in evaluation approaches.
Climate risk is an increasing concern for countries
Ultimately, the merit of an evaluation approach is determined by how well it performs in practice. Using an earlier vintage of our scores, Cappiello, Ferrucci, Maddaloni and Veggente (2025) confirm the relevance of climate risks, in particular physical risk, for sovereign credit ratings. They investigate whether sovereign credit ratings systematically incorporate climate-related risks. Using a panel dataset covering 124 countries over two decades and controlling for a standard set of rating determinants, the authors find that physical climate risks—such as temperature anomalies and natural disasters—are associated with lower sovereign ratings, especially after the Paris Agreement in 2015. This suggests that credit rating agencies (CRAs) have begun to recognize the fiscal implications of climate-related shocks on sovereign balance sheets. Similarly, countries with ambitious CO₂ reduction targets and actual emission reductions tend to receive higher ratings since the post-Paris Agreement, indicating a growing awareness among CRAs of the benefits of proactive climate policies.
With the impact of climate change becoming more pronounced each day, making comprehensive climate risk assessments is increasingly important for assessing risks, but also for identifying mitigation and adaptation priorities and related financing needs. The scores for individual countries are provided in the appendix of our paper, allowing users to adapt them to specific contexts and apply them across a variety of purposes.
The views expressed here are those of the authors and do not necessarily reflect the position of the European Investment Bank.