Reflecting on his time at COP30, Rahul Ghosh, managing director – global head of sustainable finance for Moody's Ratings, highlights how policy predictability, robust transition and resilience planning, and water-management strategies are increasingly shaping credit quality.
Environmental Finance: What are your main takeaways from COP30 in terms of how global finance is aligning with the next phase of the climate agenda?
Rahul Ghosh: From a policy standpoint, COP30 delivered some progress, but not enough to materially shift climate outcomes. Delegates agreed to begin discussions on a fossil-fuel phase-out roadmap and committed to tripling adaptation finance for developing countries. These are meaningful signals, but insufficient to move the dial toward a 1.5°C pathway. Implementation of current Nationally Determined Contributions still implies warming of around 2.3°C–2.5°C, according to UN Environment Programme, so the underlying policy momentum hasn't fundamentally changed.
From a financing perspective, COPs serve as markers of intent, but investors pay closer attention to the real-economy conditions that enable transition and adaptation investment. In that sense, COP30 – and the week before in São Paulo at PRI in Person – underscored that this phase of climate action is driven less by grand announcements and more by practical implementation.
Smaller but important initiatives stood out: the Baku to Belém Roadmap, a focus on country platforms that convene public and private actors, the Tropical Forests Forever Facility, and the IDB's Reinvest+ programme to recycle balance sheets for green lending. These smaller initiatives reinforce that financial actors are now focusing on delivery, project-level action, and investment in the real economy.
EF: Turning to climate finance mobilisation: to what extent can governments step up spending to bridge the financing gap?
RG: Governments are falling behind on decarbonisation, which increases pressure not only to scale transition investment but also protect economies and infrastructure from physical climate risks. The financing gap is significant. Moody's estimates a $2.7 trillion annual investment gap for transition and adaptation by 2030 – roughly 1.8% of global GDP. Around $400 billion a year relates to adaptation needs in emerging markets.
Governments will need to increase spending, but this is a challenge due to stretched post-pandemic balance sheets. Public debt levels are highest where climate exposure is greatest, and competing budget priorities – defence, security, basic services – limit fiscal space.
This means governments cannot close the gap alone. Their role must be to create the right enabling environment for greater private-sector mobilisation.
Our analysis shows that early and ambitious investment in decarbonisation and more resilient infrastructure would reduce the economic and financial cost of physical damage significantly: GDP losses by 2050 could fall from around 17% under current policies to somewhere between 5–9% in a net zero scenario.
EF: What does the "right enabling environment" for private capital look like?
RG: Predictability is paramount. Investors need consistent, long-term policy signals – sector and regional pathways, renewable-energy targets, and timelines for phasing out carbon-intensive technologies. These are long-dated investments, and policy predictability provides a key anchor for assessing costs and risks.
Carbon pricing and policy also matters. Emissions trading systems, carbon taxes, and mechanisms such as the EU's Carbon Border Adjustment Mechanism influence investment economics and can incentivise investment in lower-carbon technologies.
Governments can also demonstrate leadership through their own financing strategies: issuing sovereign green or sustainability-linked bonds, developing taxonomies that define eligible activities, and providing tax incentives or subsidies. These tools help crowd-in private capital by offering clarity and confidence.
EF: How are transition risks and opportunities influencing credit assessments?
RG: Moody's annual heatmap identifies 16 sectors, representing $5.2 trillion in rated debt, with elevated exposure to carbon transition risk. These include oil and gas, autos, airlines, and steel.
Companies in these sectors are working to decarbonise operations and supply chains. Some will fortify their business models and unlock new green opportunities; others face policy uncertainty, funding constraints, and uncertain returns on emerging technologies. Capital misallocation is a real risk.
Credit implications will depend on how clearly companies define a business-relevant transition strategy, how they are funding the assets and activities to deliver it, and how these investments strengthen their credit profile over time.
Growing disclosure of transition plans will also help credit analysts assess strategy, governance and investment pathways – enabling clearer differentiation between companies better positioned to manage the credit impact of transition risks, and those that will remain materially exposed.
When assessing the credibility of transition plans, our Net Zero Assessments focus on management commitment, sector-appropriate metrics, clear baselines and benchmarks for anchoring targets, whole-value-chain coverage of emissions, and costed investment programmes integrated into overall strategy. Plans that also articulate opportunities – new revenue streams, new green products – tend to support business value.
New guidance from loan market associations, the International Capital Market Association (ICMA), and the UK Transition Finance Market Review all point toward a greater emphasis on credible entity-level plans as regulators and investors are increasingly demanding clarity on how companies intend to deliver their targets.
EF: How is the financial sector responding to the rising importance of climate resilience and adaptation?
RG: Private-sector involvement in adaptation has historically been limited. Investment horizons are long, definitions of adaptation remain inconsistent, and many projects lack predictable cash flows.
However, this is starting to change as the economic impacts of extreme weather rise: according to Swiss Re, global economic losses reached $318 billion in 2024, with only $137 billion insured – a 57% protection gap, rising to up to 90% in parts of Asia and sub-Saharan Africa.
We've seen governments such as Barbados launch major resilience programmes, and cities are improving infrastructure protection, early-warning systems, dedicated reserves, relief funds and pooled insurance. But adaptation remains dominated by the public sector. The challenge ahead is creating investable pipelines that can truly attract private capital.
EF: Which financial instruments show the strongest potential to mobilise private capital for resilience?
RG: Green and sustainability bond frameworks increasingly include adaptation and nature-related categories – around 23% of project categories in all frameworks in 2024.
We've also seen the emergence of dedicated resilience bonds. The Tokyo Metropolitan Government's €300 million issuance in October 2025 – aligned with the Climate Bonds Initiative's resilience taxonomy – is a notable example. Moody's assigned a "very good" sustainability quality score in our second party opinion on the framework. This model could encourage other sub-nationals to adopt similar approaches.
EF: Water was another major focus at COP30. How is water risk shaping credit assessments?
RG: Water is now central, both as a climate-risk channel and a resilience investment opportunity. In Belém, it was clear several sub-national governments in developed and emerging markets are ramping up large-scale capital into water and wastewater recycling, efficiency and treatment.
Roughly one-third of sovereigns we rate face elevated exposure to water-management challenges, particularly in South Asia and sub-Saharan Africa, where higher risk of water stress intersects with under-investment in infrastructure. Water scarcity can constrain growth, strain public finances, and raise inflation volatility – as seen recently in India.
Sixty percent of all freshwater basins are also shared by more than one country, so you're starting to see it become more of a geopolitical risk as well.
Water management is also increasingly important for corporates. Eight sectors in our latest heatmap, representing about $2 trillion in rated debt, face high exposure to water management risks. Agriculture is the obvious example, but data centres are becoming significant: a hyperscale AI data centre can use 2 million litres of water a day, comparable to a small city. Water efficiency and governance now feature prominently in new ratings for data centres.
Robust water management – recycling, efficiency, contingency planning – is becoming an increasingly important area of focus for our analysis.
EF: Finally, what are you watching before the next COP – and over the next decade – from a sustainable-finance and credit-ratings perspective?
RG: Before the next COP, the priority is providing a conducive environment for scaling private capital. Over the next decade, two issues stand out. First, scaling investment in emerging markets, particularly for adaptation and resilience. Second, developing clearer definitions of what constitutes credible adaptation investment and planning.
If the next year is about accelerating transition through clearer roadmaps, the next decade must be about unlocking adaptation finance at scale, because physical risks will intensify regardless of the pace of decarbonisation.
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