Issues related to climate change have become an increasing focus of the IMF when making recommendations to our member countries. In particular, we have recently done a lot of work on energy subsidies and how they distort economic behavior in a way that exacerbates the problem of climate change.
Our Fiscal Affairs Department found in a study around one year ago that substantial improvement in carbon emissions, not to mention in government financial balances, could be achieved if energy fuels were priced properly, in a way that reflected the full damage that fuel may cause to our environment. This could be achieved through tools such as carbon pricing, carbon taxation, and cap-and-trade schemes.
Answered by: International Monetary Fund (Europe Office)
This is an issue for governments to address. We’re looking at this purely from a financial stability perspective. Law implementation on climate change is the government\s responsibility. Our part of the disclosure is to inform companies of the financial risk involved. The whole debate on climate change is not one for the FSB. Our mandate does not extend to that.
The risk is very much specific to the type of industry and/or geography. This is part of the challenge and why it’s so difficult. So, the task force sets out approaches to scenario analysis for those companies that have a material risk from climate change. It’s one of those things that is hard to discuss in the abstract, it will be very much dependent upon the company and obviously, for some companies, climate change will be a very good thing, so if you are a company that’s producing photovoltaics then it’s gonna be great for you because we’re transitioning away from carbon heavy energy sources to renewable ones, so actually there are some companies that benefit from the impact of changes in legislation as a result of climate change.
There’s now 500+ supporters of the recommendations of the task force and they’re some of the biggest banks, insurers, asset managers and they will be having discussions with the firms in which they’re invested in and trying to encourage them to make the disclosures.
Answered by: Financial Stability Board
- Is the free market compatible with solving climate breakdown? If so, how – seeing as resources are concentrated in the hands of so few and to a large extent fossil fuel companies?
- Is there a label for sustainable investments? And if so, which institution oversees it?
- How about Green Banking? Can / should supervisory authorities use Window Guidance and moral suasion?
- How about the environmental sustainability of the policies of your own institution?
- Why are harmful investments legal?