ECONOMYNEXT – Climate risk will play a bigger role in how countries are rated in the future, Fitch Ratings says, and has developed a tool called Climate Vulnerability Signals (Climate.VS) which helps identify countries more exposed to climate risks so their ratings can be reviewed more closely.
“We see major fossil fuel exporters and small countries in harm’s way of physical risks as the most exposed,” Fitch Ratings said.
The Fitch Ratings statement is reproduced below:
Climate risk to become increasingly important sovereign rating driver
Fitch Ratings-London-03 February 2026: Climate risk is likely to be an increasingly important rating driver for many sovereigns in the years and decades ahead, Fitch Ratings says in a new report. To monitor this, we have developed Climate Vulnerability Signals (Climate.VS), a screening tool to enhance our ability to identify sovereigns with higher potential exposure to climate-related risks and to subject those ratings to additional analysis and consideration.
Climate.VS reflect Fitch’s assessment of the potential exposure of sovereign credit profiles to climate-related risks for 2030-2050 on a scale of 0-100, based on the Climate.VS definitions and illustrative rating impact.
Around half of Fitch-rated sovereigns have a Climate.VS of 50 or more by 2050, signalling that climate-related factors could be sufficiently material to lead to a downgrade by then. But only 6% have a Climate.VS of 70 in 2050, indicating a potential downgrade of three notches. We see major fossil fuel exporters and small countries in harm’s way of physical risks as the most exposed.
Risks out to 2035, which have more bearing on whether climate factors could lead to near-term rating actions, are more limited, with only 7% of our rated portfolio having a Climate.VS of 50. We expect the impact to build up more rapidly and substantially between 2035 and 2050 as global demand for fossil fuels declines, global temperatures rise, and extreme weather events become more frequent and severe.
Any actual rating impact may differ from that indicated by the Climate.VS, depending on factors such as the extent and impact of future climate change, the evolution of technology and issuer mitigation and adaptation measures.
Climate.VS can also be used by long-term investors interested in the potential impact of climate risk on ratings beyond the horizon that is the typical focus of sovereign ratings.
‘Global Sovereigns: Exposure to Climate Risk’ is available at fitchratings.com or by clicking the link. (Colombo/Feb9/2026)