IMF taps World Bank and OECD for sustainable finance

The International Monetary Fund (IMF), the World Bank, and the Organisation for Economic Co-operation and Development (OECD) have joined forces to release a comprehensive report on climate-aligned finance. This collaborative effort seeks to provide practical strategies for aligning financial sector activities with the goals of the Paris Agreement, with a focus on assisting policymakers, regulators, and private-sector entities in strengthening their sustainable finance initiatives.

The IMF, a global organisation dedicated to promoting economic stability, extends financial assistance and policy counsel to its member nations, primarily in the form of short-term loans aimed at stabilising economies. The World Bank, with a primary mission of poverty alleviation through loans and grants, facilitates long-term investments in infrastructure and poverty reduction. Meanwhile, the OECD, an intergovernmental economic organisation, plays a pivotal role in stimulating economic progress and global trade by shaping policies that foster prosperity, equality, and sustainability.

At the heart of this partnership lies a shared commitment to advancing the objectives of the Paris Agreement, and the report underscores the pressing need to mobilise private finance to support the transition to a net-zero economy. It delves into the various tools and frameworks, such as taxonomies, scoring methodologies, and disclosure mechanisms, that are instrumental in achieving this alignment.

The report also highlights a critical challenge: the lack of robust frameworks in emerging and developing economies, which hinder the interoperability and consistency of climate-related financial data across regions. Addressing this issue is pivotal in enhancing comparability and interoperability among various countries and financial markets.

Charlotte Gardes-Landolfini, the lead author from the IMF, emphasised the significance of alignment approaches. She stated, “Alignment approaches can inform the design (and reporting for accountability) of credible and comparable transition plans by investors or other firms upstream. Combining backward- and forward-looking approaches could also be conducive to covering the whole-of-economy climate transition, including carbon-intensive sectors and EMDE-based issuers, where much of the potential for financing of decarbonisation processes remains untapped.”

Fiona Stewart, the lead author from the World Bank, stressed the necessity for cross-country policy cooperation and coordination in addressing climate change mitigation. She stated, “As a global public good, climate change mitigation requires an unprecedented level of cross-country policy cooperation and coordination. This paper will help scale up climate finance by contributing to the design of a transition finance framework applicable to emerging markets and developing economies.”

The collaborative report represents a significant step in advancing sustainable finance and aligning global financial efforts with the critical goals of combating climate change and achieving a net-zero future. It underscores the importance of international cooperation and coordinated efforts to address one of the most pressing challenges of our time.