Climate Kept its Seat at the Table in New York. Now For the Harder Part

Climate change is becoming a question of macro-financial stability. Its costs will show up in bank balance sheets, sovereign debt, and public budgets, yet climate policy and financial systems have barely begun to treat it that way.

This has been a hard year for climate to get a hearing. The energy shock has squeezed household and government budgets, and wars and trade disputes dominated the General Assembly Hall. So it matters that climate held its place at the 81^st session of the UN General Assembly (UNGA), with a summit of its own and a full day on sea-level rise. Taken together, the week’s outcomes point to a larger shift. Climate change is becoming a question of macro-financial stability. Its costs will show up in bank balance sheets, sovereign debt, and public budgets, yet climate policy and financial systems have barely begun to treat it that way.

The session’s President, Khalilur Rahman of Bangladesh, has made adaptation and resilience one of his six priorities for the year. On 23 September, António Guterres chaired his final climate summit as Secretary-General, urging governments to set fossil-fuel exit timelines. He also restated the goal of US$1.3 trillion a year in climate finance by 2035, with at least US$300 billion a year for developing countries. Germany approved its 2045 phase-out roadmap, following France and the Netherlands. The summit also launched a Global Grids Accelerator for Africa and Southeast Asia and elevated adaptation in an era of overshoot.

At the Assembly’s second high-level meeting on sea-level rise, leaders approved a declaration by consensus. Guterres noted that seas rose almost six millimetres in 2024, the largest annual increase on record, while nearly 900 million people already live in low-lying coastal zones. The declaration addresses four areas: science and data, adaptation and finance, livelihoods and heritage, and the law. Its finance language is soft. It calls for scaled-up finance, accessible, “timely and predictable disbursement,” but gives no figures, proposes no new instruments, and says nothing about debt. Loss and damage is not named. It does call for sea-level projections to be built into planning for critical infrastructure and identifies insurance among the sectors already disrupted.

Five issues from the week deserve a closer look.

Sea-Level Rise Needs a Balance Sheet

The effects of rising seas will show up on balance sheets well before they appear in communiqués. However, the declaration is silent on banks, sovereign debt and fiscal risk, which is where much of the damage will fall.

Sea-level scenarios should be part of bank stress tests in vulnerable countries, and projected coastal losses should be part of debt sustainability analysis.

Coastal land and property are collateral for bank loans and part of the tax base. As rising seas make hotels, coastal homes, ports, and farmland more vulnerable to flooding, they lose value. Bad loans rise, and government revenue falls as property taxes and tourism fees shrink. All of this comes just as governments must increase spending for coastal defences, relocation, and rebuilding.

Sea-level scenarios should be part of bank stress tests in vulnerable countries, and projected coastal losses should be part of debt sustainability analysis. My work at the IMF, among other things supporting Seychelles’ efforts to scale up climate finance, showed how close to the surface these risks already are. Much of the country’s population and urban area, along with the international airport, ports and main roads, sits on low-lying ground along the shore, highly exposed to flooding and erosion.

A sea wall or a storm drain earns nothing. Its return is the damage that does not happen, and that saving goes to households, firms, and the budget rather than to investors.

Climate Adaptation Finance: Why It Cannot be Financed Like a Toll Road

The US$1.3 trillion figure gets repeated every year. Capital markets are not short of appetite. Aligned green, social, and sustainability debt reached US$6.2 trillion by mid-2025, and development banks alone have issued over U$1 trillion. Very little of it reaches adaptation. UNEP puts developing countries’ adaptation needs at US$310–365 billion a year by 2035, 12 to 14 times current international public flows.

The reason lies in the cash flows. A toll road, like a solar farm, earns revenue that repays the bonds that built it. A sea wall or a storm drain earns nothing. Its return is the damage that does not happen, and that saving goes to households, firms, and the budget rather than to investors.

Projects like these can be financed with debt only when a strong balance sheet stands behind them. Tokyo’s €300 million resilience bond for flood and coastal defences, the first certified under Climate Bonds’ resilience criteria, was seven times oversubscribed in 2025. Ghana, where record June rains flooded Greater Accra, is still emerging from a debt restructuring. UNEP calls for concessional finance and grants so that adaptation does not add to vulnerable countries’ debt. Debt clauses that pause payments after a disaster can also help.

Fossil Fuel Exit Plans: What The Gulf Economies Should Plan For

For the GCC, fossil fuel exit roadmaps like Germany’s raise macroeconomic questions. Oil revenue funds budgets and backs the currency pegs, and Guterres bluntly stated that clean energy “has gone from alternative to unstoppable.” So, the planning assumption should be that hydrocarbon revenue will decline over the life of today’s investments. That means anchoring budgets on the non-oil balance, widening non-oil revenue, and pushing diversification harder, using the region’s solar resources and sovereign wealth to build industries that can export into a lower-carbon world.

Financing Grid Connections for Renewable Energy

That is a capital-structure problem more than a technology one.

More than 2,500 gigawatts of renewable projects are waiting for grid connections worldwide. That is a capital-structure problem more than a technology one. Transmission is regulated and low-return, and in many developing countries, it sits with utilities whose finances are weak. Private capital tends to follow when tariffs cover costs and currency risk is shared. The new Grids Accelerator aims to bring governments, lenders and technical experts together to get priority grid projects financed and built. Its added value will depend on whether it helps repair utility finances and shares currency risk with investors, rather than simply adding projects to the pipeline.

Buyer Matters for Carbon Markets and Carbon Credit Demand

Demand, as much as supply, decides whether carbon markets grow. Carbon removal shows the same pattern. The 2026 State of Carbon Dioxide Removal report puts the gap between country pledges and Paris-consistent pathways at about 1.2 billion tonnes a year by 2035. COP31 in Antalya in November is the next test of whether governments and companies commit to buying at scale and on predictable terms.

New York gave climate its day. Whether that day counts will be clearer by Antalya. The first thing to watch is whether resilience starts to be treated not as a burdensome cost, but as the foundation of macro-financial stability. The second is whether supervisors and finance ministries begin pricing sea-level rise as a financial risk.