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Political Science > Environmental Policy

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Cover IMF Working Papers
Stress Testing the Global Economy to Climate Change-Related Shocks in Large and Interconnected Economies
Mr. Camilo E Tovar Mora, Mr. Yiqun Wu, and Tianxiao Zheng
We stress test the global economy to extreme climate change-related shocks on large and interconnected economies. Our analysis (i) identifies large and interconnected economies vulnerable to climate change-related shocks; (ii) estimates these economies’ external financing needs-at-risk due to these shocks, and (iii) quantifies the spillovers to the global economy using a global network model. We show that large and interconnected economies vulnerable to climate change could trigger a drain of $1.8 trillion in international reserves (2 percent of 2019’s global GDP). Domestic and multilateral macroeconomic policies can help reduce these global lossess to about $0.8 trillion. The scenario highlights the importance of considering global spillovers when assessing the impact of climate change-related shocks.
Keywords:
Climate change; external financing-needs-at-risk; multilayered networks; climate change vulnerability; vulnerability to climate change; climate vulnerability; climate change risk; CDS spread; Natural disasters; Stress testing; Climate policy; Global
Cover IMF Working Papers
Rogue Waves: Climate Change and Firm Performance
Mr. Serhan Cevik and Fedor Miryugin
Climate change is an existential threat to the global economy and financial markets. There is a large body of literature documenting potential macroeconomic consequences of climate change, but firm-level empirical research on how climate change affects the performance of firms remains scarce. This paper aims to close this gap by empirically investigating the impact of climate change vulnerability on corporate performance using a large panel dataset of more than 3.3 million nonfinancial firms from 24 developing countries over the period 1997–2019. We find that nonfinancial firms operating in countries with greater vulnerability to climate change tend to experience difficulty in access to debt financing even at higher interest rates, while being less productive and profitable relative to firms in countries with lower vulnerability to climate change. We confirm these findings with alternative measures of climate change vulnerability. Furthermore, partitioning the sample reveals that these effects are significantly greater for smaller firms, especially in high-risk sectors and countries and countries with weaker capacity to adapt to and mitigate the consequences of climate change.
Keywords:
Climate change; nonfinancial firms; corporate performance; nonfinancial firm; firm performance; climate change vulnerability; consequences of climate change; sector peer; Natural disasters; Global