Financing for Resilience with Moody's Ratings

Conversation between Rahul Ghosh, Global Head of Sustainable Finance, and Marie Diron, Global Head of Sovereign and Subsovereign Risk at Moody's Ratings.

Moody’s Ratings, a partner of the World Climate Summit, offers valuable insights into the impact of climate considerations on the creditworthiness of organizations, debt instruments, and securities globally.  Moody’s Ratings also offers independent assessments in sustainable and transition finance to support credible climate capital growth. At the Investment COP, Marie will join the plenary panel Financing the Future – Sovereign Risk, Resilience and Capital Mobilisation, and Moody’s Ratings will host a session on integrating climate risk into sovereign credit at the World Climate Impact Hub pavilion.

What is the relevance of COP for credit markets? 

Rahul: Under the leadership of the Brazilian presidency, we expect COP30 to focus on implementing existing climate pledges rather than new commitments, with a special emphasis on repeatable financing models and roadmaps. Although COPs help set the signal for climate action, the real impact on credit markets comes from national policies, economic incentives, and investment pipelines. As governments translate global agreements into regulatory frameworks and fiscal measures, credit markets will need to adapt to new risks and opportunities. 

Why is adaptation and resilience becoming a central theme at COP, especially for emerging markets? 

Rahul: Adaptation planning is becoming a critical factor in credit analysis as physical climate risks intensify. Our research shows that investments in adaptation and resilience—such as infrastructure upgrades to withstand extreme weather—can reduce credit exposure to environmental and social risks. We estimate that fourteen sectors with $6.2 trillion in rated debt have elevated exposure to physical climate risk, including emerging market (EMs) governments. EMs are particularly vulnerable to physical climate risks because of weaker financial resilience and lower insurance penetration – protection gaps can reach 90% in some highly exposed regions. EMs also have limited financial capacity to invest in adaptation, leading to more persistent economic and social impacts.  But as adaptation planning and financing grows, we look to integrate these considerations into our ratings, recognizing that proactive planning can mitigate downside risks and enhance long-term creditworthiness.  

How large is the current financing gap for climate adaptation? 

Marie: We estimate the global climate investment gap to be about $2.7 trillion by 2030 or 1.8% of GDP.  That includes around $350 billion for adaptation. More than two-thirds of the adaptation finance gap is in areas typically funded by governments and compete with other public priorities including education, healthcare, transport, housing and safety. Private-sector involvement in such projects is hindered by long timelines and a dearth of bankable projects. Bridging the gap will require innovative public-private partnerships, blended finance solutions, and greater involvement from global financial institutions. 

What is the role of multilateral development banks (MDBs) in closing that gap?  

Marie:  MDBs have substantially increased the climate finance they provide to EMs, to $85.1 billion as of 2024 from just $38.0 billion in 2020. But the portion they dedicate to adaptation is less than half of what they allocate to mitigation and a fraction of EMs’ needs. We expect MDBs to continue expanding their climate financing capacity through innovative instruments including blended finance mechanisms, debt for nature swaps and portfolio guarantees.  For example, as of May 2025, the Asian Development Bank had secured $2.3 billion in first-loss guarantees, which will release about $10.3 billion of dedicated climate financing for its sovereign borrowers. Securitization of loans portfolios is also gaining traction, with IDB Invest undertaking a $1 billion transaction in October 2024 and the IFC launching a new securitization program to scale up the mobilization of private capital in September of this year.  

Are you seeing more issuers leveraging sustainable debt markets to fund adaptation projects? 

Rahul: We are. Adaptation- and nature-related projects totaled 23% of green and sustainability bond proceeds in 2024. For example, Tokyo Metropolitan Government has set up a new framework — which we assigned an SQS2 sustainability quality score (very good) under our second party opinion framework — to issue JPY50 billion in resilience bonds, the proceeds of which are dedicated solely to protecting the city from natural disasters and climate change impacts. The bond is the first to be certified as a resilience bond by the Climate Bonds Initiative and could encourage other governments — including those in EMs — to follow in its steps.  

How is Latin America contributing to innovative financing solutions in the context of COP30? 

Marie: Latin America has been at the forefront of innovation in sustainable debt markets. The region pioneered sovereign sustainability-linked bonds, instruments that link financial terms to sustainability targets. Latin American countries are also developing taxonomies for green and sustainable activities, highlighting both environmental and social objectives. This approach helps attract global investors seeking credible, transparent projects aligned with international standards. Ahead of COP30, Brazil and regional partners are also announcing new financing initiatives, such as the Tropical Forest Forever Facility and Reinvest +, a scheme whereby performing loans on local banks’ balance sheets will be converted to investment-grade securities that institutional investors can buy. The goal is to free up local bank capital to invest afresh into sectors aligned with national development goals and NDCs. If successful, the scheme could provide a model for mobilizing private-sector financing for adaptation, but it has yet to be tested. 

You can find more information about Moody’s sustainable finance and credit thought leadership: here.  

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Marie Diron is global head of Moody’s Sovereign and Sub-Sovereign Risk Group, with responsibility for credit ratings on countries, regional and local governments, public sector entities and multilateral development banks. Marie is also Moody’s Investors Service lead coordinator on ESG monitoring and integration across asset classes. Marie has worked in various functions at Moody’s in the Sovereign Risk Group and (then) Credit Policy. In particular, she was lead sovereign analyst for a number of Asia Pacific credits including Australia, China, India and some frontier market sovereigns. She then managed the Asia Pacific sovereign team, before expanding her responsibilities to today’s global role. Previously, in Credit Policy, Marie coordinated Moody’s Global Macro Outlook and other credit research. Marie was previously Director at Oxford Economics, leading the company’s forecasting and scenario analysis service to financial sector and corporate clients, after a number of years at the European Central Bank and Brevan Howard LLP. 

Rahul Ghosh is a Managing Director and Global Head of Sustainable Finance for Moody’s Ratings. In this role, Rahul is responsible for Moody's Ratings’ strategy to systematically and transparently incorporate material environmental, social, and governance factors into credit ratings, analytics, research and outreach. He also leads analytical teams that produce assessments on the credentials of sustainable debt instruments and financing frameworks (second party opinions) and the strength of entities’ carbon transition plans (net zero assessments). Rahul regularly takes part in high-profile industry working groups, market briefings, external conferences and media engagements. He represents Moody’s as a member of the Taskforce on Nature-related Financial Disclosures, a market-led initiative to develop a risk management and disclosure framework for nature-related risks. He also represents Moody’s on the Principles for Responsible Investment's advisory committee on credit ratings, the UK-based Transition Finance Council and the International Capital Market Association’s Green and Social Bond Principles advisory council.