The International Monetary Fund should adopt ambitious goals for assessing the physical and policy-related risks of climate change facing its members after years of paying minimal and uneven attention to such concerns, a new report said.
The Fund's has lagged individual central banks in looking at these risks, but now has a chance to take a leading role when it rewrites the rules for its Article IV surveillance of member countries and its Finance Sector Assessment Programs (FSAP), as directed by IMF chief Kristalina Georgieva, the report said.
Georgieva in January said the Fund views climate change as a fundamental risk to economic and financial stability, but taking the right steps now could boost global economic growth by 0.7% annually for 15 years.
Kevin Gallagher, head of the Boston University Global Development Policy Center and author of the report, said the Fund had been hamstrung for years because its biggest shareholder - the United States - had not been supportive under former President Donald Trump's administration.
Then Democratic President Joe Biden's sweeping Jan. 27 executive order on climate change called for the U.S. Treasury Department to ensure the United States used its "voice and vote" in international financial institutions to advance emissions reductions goals and work to end international financing of carbon-intensive fossil fuel-based energy sources.
Gallagher said it was clear that climate risks would now be a bigger focus, but urged the Fund to avoid hasty, superficial changes to its economic assessments.
"It's vitally important to get it right since when they do reviews and change things, they lock those changes in for six, seven years," Gallagher said.
"The IMF is a late-comer ... they're behind the curve," he said. "The idea is to make sure that we get best practices and ambition baked in from the beginning because it's hard to redo this stuff after it's already been decided," he said.
Gallagher said the Fund could rework its approach and unveil its new policies for financial assessments and country surveillance in October, instead of rushing to complete the work in time for its spring member meetings early next month.
He said the Fund would also likely need more resources and collaborative partners in the longer term to carry out economic assessments that reflected climate change risks, including those posed by policy shifts, such as moves to end fossil fuel use.
"They have to get to the front of the line really quickly, but they don't have the toolkit, the training," he said. "They have a super steep learning curve and culture curve."