Risk of Capital Flight Due to a Better Understanding of Climate Change

Abstract

The physical risks of climate change, including both gradual global warming and an increase in extreme weather events are likely to cause increasing financial and economic losses. This helpdesk report examines the evidence on the risk of capital flight in vulnerable countries due to a better understanding of physical climate change risks. It finds that: there are challenges in assessing physical risks; there are no examples of capital flight from developing countries due to a better understanding of the physical risks of climate change; the physical risks of climate change will differentially affect businesses and the financial performance of sectors, and as well as creating risks, could also create opportunities for investors, and the potential mechanisms for building resilience to natural disasters and facilitating recovery following a disaster could help vulnerable countries and regions adapt to the physical risks of climate change.