The transition to a low-carbon economy is usually framed as an environmental or technological challenge. But it is increasingly becoming a financial story that plays out in sovereign bond markets. Our new research shows that while financial markets already price climate transition risk into sovereign bond yields, investors reward credible governance and green infrastructure, not climate ambition alone. According to the Intergovernmental Panel on Climate Change (IPCC), limiting global warming requires a rapid structural transformation across energy, industry and infrastructure. Estimates from the McKinsey Global Institute suggest that achieving net zero could require trillions of dollars in annual investment over the coming decades. A substantial share of this adjustment will affect public finances. […]