Global debt has struck a record high of over $250 trillion, driven by borrowings in the world’s two biggest economies, resulting in heavy debt burdens that could hamper efforts to mitigate climate change, according to a report by the Institute of International Finance released on Friday.

The IIF is a global association of the financial industry, mandated to support the financial industry in risk management. Its members include commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks.

The report said the growing indebtedness, seen rising to $255 trillion by end-2019, has pushed debt to GDP ratio to 320% amid a global economic slowdown and that there are limits to debt-fueled growth. The United States and China together accounted for over 60% of the increase.

“With over 60% of the world’s countries expected to see below-potential growth in 2020, accommodative central bank policy allows both corporates and sovereigns to borrow and refinance at low rates,” the report said.

“Moreover, investor appetite for funding the corporate sector in high-debt countries is sensitive to shifts in global risk sentiment; if this appetite wanes, it could weigh on capex and new job creation.”

It said that China saw its debt-to-GDP ratio balloon to 306% from around 130% in 1999 and around 200% in 2009. On the other hand, the forex debt of Chinese non-bank borrowers fell to just above 4% of GDP from a peak of over 7% in 2014 – but still higher than the minus 1% figure for 1999.

The primary reason for the rise in indebtedness has been the deepening of global bond markets, which have grown to $115 trillion in mid-2019 from $87 trillion a decade earlier. This has been mainly government-led with the sovereign share of markets rising to 47% from 40% in 2009. Emerging market grew fastest, swelling by over $17 trillion to near $28 trillion in the past decade. Bonds now account for over 47% of EM debt up from 43% in 2009.

But there is one area where flows are lagging.

“Global climate finance flows remain far short of what’s needed for an effective transition to a low-carbon economy,” the report said while highlighting that total global issuance of sustainable loans and securities to date has amounted to slightly over $1 trillion.

It said that an average of $3.5 trillion ($3 trillion) in 2010 U.S. dollars is required annually to prevent global temperatures from increasing 1.5 (2.0) degrees Celsius by 2050.

“To achieve this goal, public and private climate finance flows will have to be scaled up rapidly.”