Total global car sales are on track to hit their lowest level since 2010 as global recession fears loom.

Climate-vulnerable low- and lower-middle income countries (LLMICs) have much lower “debt tolerance” (ability to manage high levels of debt...

Offset issuance in voluntary carbon markets has slowed this year amidst concerns over excess offset supply; Rising corporate net-zero pledges and technology advances (e.g. blockchain-based protocols) should support market growth, however, lack of price transparency and standardization remains a significant barrier for market growth; The finalized Article 6 Rulebook could spur efforts to integrate voluntary and compliance markets over time; Defining global threshold standards for high quality carbon credits should help bring greater price transparency and liquidity to voluntary carbon markets; A large share of carbon offset projects originates from emerging markets; pure removal-based offsets remain too scarce

Mounting geopolitical tensions risk undermining the international collaboration needed to address global challenges, including efforts to scale up climate finance; Yet delays to climate policies may prove costlier than swift action—which would further exacerbate public debt burdens; Near-term sovereign debt vulnerabilities in major emerging markets have increased substantially this year, but less so than in 2020; these growing debt strains make the challenge of sourcing climate finance more difficult still.

Rising borrowing costs and the strength of the USD will exacerbate debt vulnerabilities in emerging markets; With EM budget deficits still running above pre-pandemic levels, higher and more volatile energy prices could force some countries to increase public spending even further; Effective investor relations (IR) programs can play a vital role during times of diminishing market confidence to mitigate contagion by providing investors with a better understanding of policy goals; However, successful IR practices require timely dissemination of relevant information beyond central government debt obligations and fiscal operations. Countries still need to provide more data on ESG priorities and progress.

Country-level ESG scores offer a practical starting point to compare ESG performance across investment destinations; While not a substitute for comprehensive ESG due diligence, ESG scores also help monitor trends over time; Chile, Brazil, and Poland have the top aggregate ESG scores in our sample of emerging markets, reflecting their strong environmental performance, though Poland has more scope to reduce carbon intensity; South Africa, Vietnam, Russia, and India score in the lower range on the ESG factors that we track in our scoring.

Across the mature and emerging markets that we cover in our Global Debt Monitor, non-financial corporate debt is at record high of near $90 trillion—over $12.5 trillion higher than pre-Covid levels; Emerging markets recorded more than half of this buildup in non-financial corporate debt—an increase of some $7.5 trillion since 2019. Of note, Chinese corporates have stepped up borrowing even more in 2022; With the Ukraine-Russia war disrupting the global economic recovery, corporate valuations have come under pressure as global funding conditions tighten rapidly; Fully one-third of small-sized firms in mature markets are already having difficulty covering interest expenses.

The rapid buildup in sovereign debt levels over the past 15 years has greatly increased the risk of further debt strains—especially in highly-indebted developing countries—as global rates climb; higher food and energy prices also hurt; Timely sovereign debt workouts are a challenge: studies suggest that official creditors are slower to coordinate in resolving arrears than private creditors—concerning, as a large portion of low-income countries’ debt is owed to official creditors; The updated Principles for Stable Capital Flows and Fair Debt Restructuring offer an effective framework for debt crisis prevention and resolution, highlighting the best market-based practices to promote sustained market access.

Against a challenging market backdrop, flows to ESG funds fell to just $75 billion in Q1 2022—a sharp slowdown from their recent pace. Inflows in March ($15 billion) were at their weakest since March 2020; Sustainable debt issuance dropped to $285 billion in Q1, down 30% from Q4 2021; However, investor demand will remain underpinned by the continued acceleration in corporate net-zero pledges.

Despite rapidly growing use of renewables, many EU countries still rely heavily on fossil fuel energy; Russia currently provides the lion’s share of EU energy: 38%, 23%, and 46% of imported gas, oil, and coal respectively; High and volatile fossil fuel prices should accelerate Europe’s transition to clean energy over the medium term…; …but greater demand and higher prices for non-Russian gas sources could push Asia towards cheaper coal; Change could come quickly: the REPowerEU plan aims to cut EU reliance on Russian gas by two-thirds in 2022.