Question: How many people believe that the IMF should stay away from the whole controversial business of Climate Change?
Or, more appropriately; how many believe that central banks should keep away from the difficult business of fighting climate change and the associated risks?
These were the leading questions the new Managing Director of the International Monetary Fund (IMF), Kristalina Ivanova Georgieva asked the packed Atrium of the IMF building yesterday afternoon in the ongoing Annual Meetings of the IMF/World Bank, the world’s twin premier multilateral financial institutions.
Somewhere near the front row, immediately opposite the high-level four-man panel at the seminar, a solitary hand shot up. And that was it. For Georgieva, who was appearing in her first panel assignment in this year’s meetings, that single vote was indicative of the general global consensus on the need for the world to take seriously the task of pursuing a low carbon and climate resilience policy, which she agrees is “not a trivial task for many economies”.
Disclosing that the Dominican Republic, one of the many poor countries vulnerable to the ravages of climate change, lost an alarming 200 percent of GDP to Hurricane Dorian, Georgieva was emphatic that “no individual or institution in the world can stand back from the responsibility to act”. That unfortunate country was not the only victim of the effects of global warming. Scientists the world over have warned that climate change will do humanity in, if world leaders and policymakers don’t take measures to put a brake on the rise in global temperature to no more than two degrees above pre-industrial levels as agreed at the Paris Climate conference of 2016. In recent times, no month has passed without distressing reports of climate-related disasters in one or multiple regions of the world, rich or poor, developed or underdeveloped.
For the panelists, therefore, the question should not be whether central banks should come to the rescue as they did in the wake of the still simmering global financial crisis but how they can intervene to stave off what Irishman Philip Lane, Chief economist, European Central Bank called an “existential threat”. Climate change, he argued, does not just constitute a risk to the financial system, as every sector will be affected in the coming years, necessitating holistic structural changes to how the global economy works.
Experts estimate that over $12 trillion in assets may be “stranded” or will be in danger of going under as nations make the transition from fossil fuel to renewables and strenuously shift investment dollars from brown to green assets to escape the risks associated with climate change in the coming years.
Former under-Secretary of the United Nations, Shamshad Akhtar is particularly worried about the plight of vulnerable countries, mostly poor Island nations and struggling emerging economies. These have very small carbon foot prints but are most susceptible to the ravages of climate change. Regardless, she decries the projected three and 10 percent decline projected for the global economy by 2050 and 2100 respectively if concerted efforts are not brought to bear on the phenomenon.
The final word may go to Sabine Mauderer, Executive Board member, Deutsche Bundesbank, who cautioned that the intervention of central banks alone will not avail much if fiscal authorities in all countries of the world do not deploy policies to keep the world from going under, literary and metaphorically.