Announced today, Professor Matthew Agarwala has been awarded the 2025 Financial Times Award for Academic Research with Impact.
The team developed a framework for assessing climate impact on sovereign credit ratings. Using Artificial Intelligence to merge climate modelling data and financial data, the research revealed how environmental changes influence credit ratings.
Leading international bank Standard Chartered has cited the work as a game changer, bridging the gap between climate studies and the need to include climate risk components in the bank’s internal models. The research's estimation of sovereign rating downgrades under climate risk scenarios is particularly useful in building a climate-adjusted internal rating for stress testing and loan provisioning.
For this research, Prof Agarwala worked with Pati Klusak (Edinburgh Business School and Bennett Institute Visiting Professor), Matt Burke (University of Sheffield), Uli Volz (SOAS, University of London) and Moritz Kraemer (Cambridge University Business School).
Link to the award-winning paper: Rising Temperatures, Falling Ratings: The Effect of Climate Change on Sovereign Creditworthiness