Caio Ferreira, Mr. David L Rozumek, Mr. Ranjit Singh, and Felix Suntheim
Strengthening the climate information architecture is paramount to promote transparency and global comparability of data and thus improve market confidence, safeguard financial stability, and foster sustainable finance. This note provides a conceptual framework around the provision of climate-related information, discusses the progress made to date, and points toward the way forward. Progress and convergence are required on the three buildings blocks of a climate information architecture: (1) high-quality, reliable, and comparable data; (2) a globally harmonized and consistent set of climate disclosure standards; and (3) a globally agreed upon set of principles for climate finance taxonomies. A decisive, globally coordinated effort is needed to move forward on all three fronts.
disclosed. As the Network for Greening the Financial System (NGFS) and the Financial Stability Board (FSB) reports on data gaps have highlighted, there is a need for more forward-looking and granular data, improved consistency and accessibility of data, as well as mechanisms such as verification and audit to improve the quality of data. 2
Strengthening the climateinformationarchitecture is paramount to promote transparency and global comparability of data and thus improve market confidence, safeguard financial stability, and foster
pressure points from physical climate shocks and the transition to a low-carbon economy. Recent FSAPs in Norway and the Philippines included climate risk stress testing. Assessments of regulatory and supervisory frameworks can ensure appropriate prudential supervision of all climate risks across a country’s entire financial system.
Better data, better decisions
Tree building blocks will strengthen the climateinformationarchitecture: (1) high-quality, reliable, and comparable data; (2) a harmonized and consistent set of climate disclosure standards; and (3) a
International Monetary Fund. Monetary and Capital Markets Department
sustainable fund sector to become an effective driver of the transition, policymakers should: o Urgently strengthen the global climateinformationarchitecture (data, disclosures, sustainable finance classifications including climate taxonomies) both for firms and investment funds. o Ensure proper regulatory oversight to prevent greenwashing.
After those elements are in place, tools to channel savings toward transition-enhancing funds (such as financial incentives for investments in climate-oriented funds) could be considered to complement other critical climate
International Monetary Fund. Asia and Pacific Dept
Policymakers, Companies, and Investors Unlock the Potential of the Green Bond Market? , Journal of Risk and Financial Management , Vol. 13 , Issue 3 , Page 61 .
Ferreira , Rozumek , Singh , and Suntheim , 2021 , Strengthening the ClimateInformationArchitecture , IMF Staff Climate Note 2021/003 ( Washington ).
Green , Jessica F , 2021 , “ Does Carbon Pricing Reduce Emissions? A Review of Ex-Post Analyses ,” Environmental Research Letters , Vol. 16 , No. 043004 .
Gunningham , Neil , 2013 , “ Managing the Energy Trilemma: The Case of
Ando Sakai, Mr. Francisco Roch, Ursula Wiriadinata, and Mr. Chenxu Fu
alongside the level of sovereign green bond issuances. Whether the administrative costs associated with green bond issuance exceed the benefit is a country-specific question, but strengthening peer learning and climateinformationarchitecture could help reduce the costs and increase the benefits over time ( Ferreira and others 2021 ). It remains an open question whether the purpose of the project associated with the green bond is a key determinant of the greenium, and whether green bonds have resulted in the climate outcomes they intended to achieve. The further
Mr. Sakai Ando, Mr. Francisco Roch, Ursula Wiriadinata, and Mr. Chenxu Fu
Financial markets will play a catalytic role in financing the adaptation and mitigation to climate change. Catastrophe and green bonds in the private sector have become the most prominent innovations in the field of sustainable finance in the last fifteen years. Yet, the issuances at the sovereign level have been relatively recent and not well documented in the literature. This Note discusses the benefits of issuing these instruments as well as practical implementation challenges impairing the scaling-up of these markets. The issuance of these instruments could provide an additional source of stable financing with more favorable market access conditions, mitigate the stress of climate risks on public finances and facilitate the transition to greener low-carbon economies. Emerging market and developing economies stand to benefit the most from these financial innovations.
Emerging Markets – Easy Come, Easy Go , Monetary and Capital Markets Department Global Financial Stability Notes No. 2021/05 . Washington, DC , December .
International Monetary Fund (IMF) . 2021f . Strengthening the ClimateInformationArchitecture . Staff Climate Note 2021/003 . Washington, DC , September
International Monetary Fund (IMF) . 2022a . Keeping Pace with Change: Fintech and the Evolution of Commercial Law . FinTech Note No. 22/01 . Washington, DC , January .
International Monetary Fund (IMF) . 2022b . Blockchain Consensus Mechanisms
Rohit Goel, Deepali Gautam, and Mr. Fabio M Natalucci
number of EMs. While adherence to ICMA principles is rising, there is still a weak tail of countries from this standpoint, and ESG scores have declined for most EMs—especially post pandemic.
Policy options useful to develop mature and transparent sustainable finance markets in EMs include:
1) On climate, policymakers should strengthen the global climateinformationarchitecture . This architecture includes three components: (1) high-quality, reliable, and comparable data; (2)sustainable finance classifications that align investments with climate goals; and (3) a