Measuring Climate Change: The economic and financial dimensions

 – Opening remarks at the 9th IMF Statistical Forum

By Bo Li

It is my pleasure to open the Ninth IMF Statistical Forum. As Louis Marc mentioned, the theme of this year’s Forum is the measurement of climate change, with a special focus on its economic and financial dimensions. Climate change is one of the biggest threats faced by the global community, and hence a critical topic that requires in-depth forward-looking analysis and the best possible data. We already see the effects everywhere. From the increases in wildfires and droughts in some parts of the world, to the melting ice caps and flooding in other parts.

At the IMF, we are committed to supporting our members in the fight against climate change. We are putting climate at the heart of our economic and financial surveillance. We are scaling up our capacity development. We are active in the global policy debate. And we are trying to mobilize resources for developing economies, including through the Poverty Reduction and Growth Trust (PRGT) and possibly also a new Resilience and Sustainability Trust (RST) to channel part of the recent $650 billion SDR allocation to our members that need it the most.

But effective climate policy action must be grounded in accurate and reliable indicators – and right now these face serious limitations. For example, many countries are not measuring and reporting emissions data on a timely basis. “If you don’t measure it, you can’t manage it,” as they say. This applies to emissions as well as many economic and financial aspects of climate change.

Both policymakers and investors face a lack of reliable and comparable indicators – especially on the transition to more sustainable business models. While a growing number of firms set emission reduction targets for themselves, the vast majority still do not provide this information. Data gaps are particularly large for small and medium enterprises and for firms in emerging markets.

To make progress, harmonization will be essential. A part of the problem is the multitude of existing frameworks currently used by firms and financial institutions. There are more than 200 frameworks, standards, and other forms of guidance on sustainability reporting and climate-related disclosures across 40 countries. This undermines consistency and comparability.

Therefore, I see an urgent need to strengthen the climate information architecture. There are three building blocks needed to support this: (i) high-quality, comparable, and timely indicators; (ii) a harmonized and consistent set of climate disclosure standards; and (iii) a broadly agreed upon global taxonomy. This taxonomy must be flexible enough to recognize the complex efforts taken by companies to transition to a climate-sustainable business model. The statistical community also has the responsibility of integrating climate change data into international statistical standards and making the resulting data available to the public.

Such a harmonized, timely, and reliable set of data can help unlock action by both the public and private sector. Policymakers can properly develop fiscal, monetary, and financial policies and address physical, transition, and financial risks. The private sector can assess climate exposures, and investors can facilitate the flow of capital towards climate-sustainable investments.

Fortunately, we have grounds for optimism. Extensive work has already been done to bridge the data gaps on both macro and micro levels. For instance, the Network for Greening the Financial System has been working on identifying and prioritizing data needs.

For its part, the IMF launched the Climate Change Indicators Dashboard earlier this year. The Dashboard provides timely and standardized climate change-related experimental indicators. It improves the frequency and timeliness of some existing climate change data, bringing their publication to par with the general pattern in macroeconomic statistics. Equally important, it aims to ensure a common methodology to make data comparable across countries. This will serve as a framework for the new G20 Data Gaps Initiative that is being prepared and would set climate data as a high priority.

The IMF Dashboard is a truly international statistical initiative and a product of close cooperation with other international organizations and institutions – the OECD, the World Bank Group, the United Nations, the European Commission, Eurostat, the Food and Agriculture Organization, the International Energy Agency, and the National Oceanic and Atmospheric Administration, among others. The close cooperation avoids duplication, maximizes synergies with other existing climate-related workstreams, and leverages the Fund’s leadership in relevant statistical methodologies.

Despite the progress in bridging data gaps, more work still needs to be done. Consistent, timely, and uniform implementation of internationally agreed sustainability reporting standards are necessary. Here, strong international commitment will be needed, while considering regional, institutional, and legal specificities. Moreover, implementation challenges for emerging and developing economies and for many small and medium enterprises will have to be considered carefully. At the same time, it is important to continue to develop statistical standards and methodologies, building on the existing statistical macroeconomic frameworks, including the System of National Accounts, the Balance of Payments and International Investment Position Manual, and the System of Environmental-Economic Accounting.

These considerations motivate the theme of this year’s Statistical Forum, where we will aim to advance our understanding of the measurement of climate change and its economic and financial impacts. Among the questions to be considered this year are:

(i) How is economic activity affecting the planet, and what are we doing to combat rising temperatures?; (ii) Where are the financial risks?; (iii) What fiscal policies are governments responding with?; (iv) Where are the data gaps?; and (v) What is the role of economic and financial statistics in combating climate change?

Over the next two days, we will learn what policymakers, experts, academics, statisticians, private sector executives, and international organizations are doing to answer these questions.