This article investigates and empirically tests the link between climate change and sovereign risk in Southeast Asia. Southeast Asian countries are among those most heavily affected by climate change. The number and intensity of extreme weather events in the region have been increasing markedly, causing severe social and economic damage.

Placing Asian economies onto a sustainable development pathway requires an unprecedented shift in investment away from greenhouse gas, fossil fuel, and natural resource-intensive industries toward more resource-efficient technologies and business models. The financial sector will have to play a central role in this green transformation.