Digital disruption is a key change agent for businesses, their competitive and industrial dynamics, and the capital markets that fuel growth. Yet while technological advancement and adoption are rapidly catalyzing new networks across an increasingly interconnected world, the frenetic pace of technological progress exposes companies and countries alike to mounting cyber risks.

As the macroeconomic and credit outlook darkens with the risk of recession looming on the horizon, the changes are having secondary effects on the capital flows that interconnect the global economy. The myriad shocks that have hit economies and markets—the Russia-Ukraine war and U.S.-China tensions; major central banks' aggressive battle against persistent inflationary pressures; the rising risk of recession; and intensifying climate risks—have prompted countries and investors to rethink and in some cases begin to reroute capital movements, trade flows, and supply chains.

Increasing awareness of the physical impacts of climate change and urgency around taking action to decarbonize the global economy has proliferated among citizens, policymakers, economic actors, and other market participants in recent years. But rising energy and commodities prices and increasing energy supply concerns following Russia’s ongoing invasion of Ukraine have forced governments to rethink their priorities. Economies are now facing tough choices about how to balance their immediate energy security needs with longer-term energy transition plans—and these trade-offs will likely have implications for decades to come. Against this backdrop of uncertainty, markets can play a key role in shaping the path to net-zero.

After an unprecedented era of remarkably favorable financing conditions, circumstances are rapidly changing—redefining the global economy and challenging credit markets. These intensifying headwinds could expose many borrowers to operational and structural pressures as central banks aggressively tighten monetary policy. At the same time, the ongoing Russia-Ukraine war continues to exacerbate inflation and cost pressures with high commodity, energy, and food prices, and slowing global economic activity signals consumers’ concerns.

As the COVID-19 pandemic and the war in Ukraine drag on, their associated humanitarian, economic, market, and trade implications have roiled the international order. The associated rising political uncertainty and geopolitical risks are radically transforming the world. Such disruptive events and new unknowns can affect funding costs and capital flows, given the deep financial and market interconnectedness of the globalized economy.