Net Zero Investor reported on discussions during London Climate Action Week, where investors, policymakers and climate experts examined how physical climate risks remain systematically underpriced across financial markets.

The article highlights the launch of Scientific Climate Ratings’ Sovereign Climate Risk Ratings at an event hosted by the EDHEC Climate Institute, presenting a new framework to quantify the long-term macroeconomic impacts of climate change on sovereign economies.

Key themes from the article include:

• Climate risks remain only partially reflected in financial markets, creating a pricing blind spot for sovereign investors.
• Forward-looking sovereign climate ratings provide an early indicator of structural climate exposure before it is fully incorporated into sovereign spreads and market valuations.
• Subnational climate modelling captures regional differences in climate impacts, producing more accurate national economic projections than country-level averages alone.
• Decision-grade financial metrics translate chronic physical climate risks into expected macroeconomic impacts, supporting better-informed investment, lending and risk management decisions.

The article reinforces the growing consensus across the financial sector that climate risk should be assessed not only as an environmental challenge, but as a financially material driver of long-term economic performance.

Read the full article here.