Sovereign Finance, Climate and Developme

The ability of many emerging market and developing economy (EMDE) countries to meet their climate financing objectives depends to a large extent on their cost of capital, which in turn is impacted by the actual and perceived risks of their sovereign debt.  According to the Jubilee Report published in June 2025 by the Pontifical Academy of Social Sciences and the Columbia University Initiative for Policy Dialogue, 54 countries spend over ten percent of their revenues on interest payments, and 3.3 billion people live in countries that spend more on interest than healthcare.  EMDE countries need workable tools to reduce financing costs and manage sovereign debt in order to fund their development needs and to achieve the climate objectives set out in their nationally determined contributions under the Paris Agreement.  

This course will explore the roots of the problem, including the pro-cyclical nature of sovereign financing and refinancing; the role of international financial institutions and credit rating agencies; and the main obstacles to resolving sovereign debt distress in an orderly and timely way, contrasting resolution tools for sovereign debt with those available in the private sector.  Drawing on real-world case studies, we will look at structural innovations that could help debottleneck climate finance, and how effective they can be.  We will consider several prominent proposals to reorient the global financial architecture, focusing on whether and to what extent they can reduce EMDE funding costs and unlock financing for sustainable development and climate investment.