New IMF chief says climate change will be key priority

KRISTALINA GEORGIEVA
KRISTALINA GEORGIEVA

Fund set to integrate environmental risks as part of economic analysis of countries

LONDON • New International Monetary Fund (IMF) managing director Kristalina Georgieva will put climate change high on the agenda at this year's meetings in Washington, and has said the fund is getting ready to incorporate environmental risk into its economic analysis.

"The IMF is gearing up very rapidly to integrate climate risks in our surveillance work," she said on Wednesday. "When we are working in countries that are either big emitters of carbon and need to transition, or are at high risk of carbon shocks, there is no way to address the fundamentals of their economies without looking at these climate risks."

Integrating climate change into its assessments would help the IMF understand the challenge, and create incentives for moves in the right direction, said Professor Nick Stern, chair of the Grantham Research Institute on Climate Change and the Environment.

The IMF's surveillance of countries culminates in Article IV consultations, where a team of economists visits a country to discuss economic and financial developments.

The fund is already incorporating environmental factors into its analysis of higher-risk countries and would like to make it routine, Ms Georgieva said.

Her comments - made at a discussion on central banks and climate change - came as a political movement against global warming gains steam.

An IMF report published last week called climate change a crisis that requires immediate action from all levels of government.

Central banks have increasingly entered the debate, particularly through membership of the Network for Greening the Financial System, which promotes sustainable growth. As part of its work for the group, the Deutsche Bundesbank will publish a handbook on the role of monetary authorities in fostering the greening of financial markets at meetings this week.

CRUCIAL TASK

This is now a category of risk that absolutely needs to be front and centre in our work.

IMF'S NEW MANAGING DIRECTOR KRISTALINA GEORGIEVA

Asked whether central banks are ready to tackle climate-related challenges, Ms Georgieva said most agree on the need for disclosure and stress testing for environmental risks. How much they can use their tools to foster green investments and whether disclosure should be mandatory are more controversial areas, she added.

Ms Georgieva's predecessor Christine Lagarde had also pledged to make climate change a core part of her work as president of the European Central Bank (ECB), a job she starts next month.

Asked if climate-related risks were within the ECB's mandate, its chief economist Philip Lane said "to deliver our core mandate, we absolutely have to be involved", highlighting that weather shocks were already an important source of economic volatility in Europe.

"This is now a category of risk that absolutely needs to be front and centre in our work," Ms Georgieva said.

"The criticality of addressing climate change for financial stability, for making sure that we can have sustainable growth, is so very clear and proven today that no institution, no individual, can stand back from the responsibility to act."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 18, 2019, with the headline 'New IMF chief says climate change will be key priority'. Print Edition | Subscribe