Climate change poses a high risk to economic and financial stability – IMF

Economic news for Wednesday, January 27, 2021

Source: 3 News

2021-01-27

Climate change poses serious threats to economic and financial stability, said Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva.

In a remark at the Climate Adaptation Summit on Monday, January 25, she said that as world leaders aim to emerge from the COVID-19 pandemic and the economic crisis it has sparked, “we must face a bigger threat – that of climate change.

She added: “This is a fundamental risk to economic and financial stability. It is also an opportunity to relaunch growth and create new green jobs.

“Our research shows that combining steadily rising carbon prices with a push for green infrastructure can increase global GDP by around 0.7% over the next 15 years and generate jobs for millions of people.

“That’s why at the IMF we are embracing the transition to the new climate economy – a low-carbon, climate-resilient economy that helps combat the causes of climate change and adapt to its consequences.

“This means actions in four key areas: First, mainstreaming climate into our annual economic assessments of countries – our Article IV consultations. In highly vulnerable countries, we focus on adaptation; and we develop mitigation analysis, including carbon pricing, in our assessments of large emitters.

“Second, include climate-related financial stability risks in financial sector supervision – through standardized disclosure of these risks, improved stress tests and assessments of supervisory frameworks.

“Third, intensify climate in capacity development to help equip finance ministries and central banks with the skills to take climate considerations into account.

“Fourth, integrate climate indicators into macroeconomic data. This year we will be launching a climate change dashboard, with indicators to track the economic impact of climate risks and the measures taken to mitigate them. “