Welcome! Thank you for joining us for this important and timely dialogue on climate-related financial risks and green finance.
The science is clear: only decisive action to contain climate change will prevent disastrous consequences for people and economies. We must reduce global emissions by 25 to 50% by 2030 to limit average global warming to between 1.5 and 2 degrees Celsius.
The Asia-Pacific region understands the urgency. Here the temperatures are rising twice as fast than the global average, risking more frequent and severe weather disasters.[i] And the region produces about half of global emissions and is home to five of the world’s largest greenhouse gas emitters.
What should we do?
We must redirect resources to low-carbon and energy-efficient activities. This requires a comprehensive set of policies, including adequate carbon pricing, appropriate climate risk disclosure, offsets to protect vulnerable populations, and green investments.
We estimate that the world needs energy-related investments at around $3.3 trillion per year until 2030 achieve net zero by 2050.[ii]
While that number is high, it overshadows the wider benefits – just by phasing out the smut they encounter tens of trillions of dollars per yearas we show in an article published today.[iii] All of this underscores the importance of putting a price on carbon – or equivalent measures – to encourage the transition and reap these benefits.
Invest in adaptation is equally important. We estimate the public costs of adaptation at approximately a quarter percent of global GDP per year over the next few decades. But for some climate-vulnerable countries, the figure could reach 20 percent of GDP.[iv]
While climate finance efforts are increasing, they fall far short of meeting the needs. We must finding urgent ways to attract more climate finance, especially for emerging and developing economies.
The role of markets and the private sector is essential mobilize and allocate resources efficiently, while putting a price on climate risks.
Many issuers, including emerging market economies, have begun to embrace funding via environmentally sustainable financeand the financial sector plays an important facilitating role.
Of course there is significant challenges, such as physical and transition risks. They need to be well managed by central banks, regulators and financial firms, including strengthening and harmonizing regulation, data, disclosures and taxonomies.
But the the greatest risk for us– and for the world of finance – is to miss the path to net zero.
The risk of market failure in climate finance highlights the importance role of national authorities and international institutions provide and catalyze the necessary financing. This should be constructed as a strong partnership with the private sector and financial markets.
The bottom intensify its work and play a central role in the fight against climate change. We support our members through policy advice, identification of financial stability risks, capacity development and resolving data gaps.
On the lending side, our new Confidence in resilience and sustainabilityalready $40 billion strong, will help countries address structural challenges like climate change.
We collaborate with our partners, such as the Network for Greening the Financial System. Their president, Ravi Menon, is here today—thank you for your important work!
Einstein once said that “we cannot solve our problems with the same thought that we used when we created them”.
This is the purpose of this forum – to propose new thinking and exchange on new ideas to face climate risks and seize green opportunities. I wish you all the success in your work.
[i] Climate emergency in Asia (imf.org) based on EM-DAT (2020)
[ii] IMF estimates based on IEA data.
[iii] Adrian, T., P. Bolton, AM Kleinnijenhuis (2022) “The Great Carbon Arbitrage.” IMF Working Paper, June 1.
[iv] IMF Staff Note on Climate (2022) Macro-Fiscal Implications of Adapting to Climate Change.