The impact of climate change is severe for numerous developing nations. When extreme events occur, these countries often have to allocate limited budget resources for emergency aid, which can further weaken their economies. A new financial tool, crisis-resilient loans linked to climate risk insurance, offers a solution by alleviating payment obligations in the event of damage. This approach ensures greater liquidity during crises while preserving creditworthiness.
The latest issue of Development Policy Compact explores this concept, highlighting its benefits and challenges.
"Shock resilient loans – an innovative way of bolstering resilience to climate risks," was published on November 11, 2024.