Remarks by the Managing Director at the COP26 Session on A Financial System for Net Zero

November 3, 2021

The International Monetary Fund is set up to be at the center of the global financial safety net.

Our job is to worry about macroeconomic and financial stability. And with climate presenting a growing risk to this stability—as well as climate action creating opportunities for growth and employment—this conversation is straight up our alley.

So, is it that we speed-up to bring climate at the heart of our work that is relevant for the conversation we have right now?

First, in our financial sector assessment programs, we are focusing on climate-related financial stability risks.

And, and as we have heard so far, we look at the standardized reporting of these risks. I am so pleased to hear we have now a Board to deliver these standards for all of us.

20 years ago, we invented stress testing. Now, we are adjusting it to stress test for climate-related risks, and we are very seriously engaged in what is the role of the supervisory authorities.

What is it that they need to do?

Our goal is to help our members understand these risks and take precautionary actions in a way that helps them to integrate physical shocks, to integrate transition shocks, and—very importantly as we heard in the previous session—to recognize that exiting fossil fuels ought to be simultaneously complemented with increases in renewable energy.

In emerging markets, the balance has to be tilted towards the offset being bigger than what is being closed down.

How the financial system delivers this is going to be hugely important. And soon, our assessments of supervisory frameworks will consider climate risks to evaluate the adequacy of prudential regulation and the adequacy of supervision.

Second, it is not good enough that we can do it. It is important that our members can do it.

We are scaling up our capacity development programs. So emerging markets—especially low-income developing countries—so they can be they can handle in their financial system the understanding of these risks. And integrate climate policies in their macro-financial policies.

And finally, data.

We have to recognize that climate needs to be imported in all kinds of data.

We talked about high quality, reliable compatible data for standardized reporting. But more broadly, we need to get climate data in our normal macroeconomic data.

So, when you look at the country profile, you see the GDP, employment. But there, we need also to have data on carbon intensity, on vulnerability, to give a holistic picture of the economy at a macro level and of course, down to the financial sector.

Thank you. There is a lot to do. Very happy to be part of doing it.

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