Second Climate Capacity Development Partnership Forum

Second Climate Capacity Development Partnership Forum

Climate change presents a major threat to long-term growth and prosperity, and it has a direct impact on the economic wellbeing of all countries. The IMF has a role to play in helping its members address those challenges of climate change for which fiscal and macroeconomic policies are an important component of the appropriate policy response.

Since the adoption of the IMF Strategy to Help Members Address Climate Change Related Policy Challenges—Priorities, Modes of Delivery, and Budget Implications in 2021, the IMF has considerably stepped up its capacity development work on climate, with the support of its development partners.

Building Climate Resilience

On December 13, 2023 – the day of a successful outcome at COP28 –, the International Monetary Fund (IMF) organized the Second Climate Capacity Development (CD) Partnership Forum. Launched in the Spring 2023, this climate CD partnership forum supports the implementation of the IMF's climate strategy.

The forum plays an essential role in reviewing the expanding IMF's climate-informed technical assistance and training, addressing members' increasing demand for IMF support, and identifying upcoming priorities to which development partners could contribute. Partner funding is indeed essential to address the pressing demand of some of the most vulnerable IMF members. Coordination with partners is also essential to ensure the effectiveness of this work, including when considering the limited absorptive capacity of some capacity development users.

IMF Climate Capacity Development Brochure

During the first edition of the Forum held on May 4, 2023, IMF capacity development partners expressed strong support for the strategy and called on the Fund to mainstream climate across our CD portfolio, focus on the most impactful activities, increase cooperation with partners and other development institutions, and expand support to countries that are most vulnerable to climate risks, including fragile, low-income, and small island states. ?

Building on the momentum of the first edition, this second forum focused on scaling up the IMF’s climate CD in Small Island Developing States (SIDS), and early-stage IMF innovative tools and models that incorporate climate in countries' financial systems and macroeconomic frameworks.

Broad Participation from across Partners and the IMF

The forum involved representatives from:

This broad participation reflects how the IMF is gradually mainstreaming climate-related risks and opportunities into our macroeconomic and financial policy advice.

Addressing Small Island Countries' Vulnerability to Climate Change

During his opening remarks, the Director of the IMF Institute for Capacity Development (ICD), Dominique Desruelle, stressed that "SIDS are at the forefront of the climate challenge and amongst the most vulnerable countries to climate shocks. Populations in these states are most affected by climate shocks and the resulting economic disruptions. SIDS also face a severe shortage of climate finance. As such, SIDS are also among the countries that are most likely to request support from the IMF’s Resilience and Sustainability Trust (RST)."

As a result, he added, "the IMF’s regional capacity development centers in the Caribbean (CARTAC), the Pacific (PFTAC), and Africa (ATI), have been working closely with their SIDS members in integrating climate into their macroeconomic planning, and financial and risk management processes."

During the forum, IMF staff presented past and ongoing climate CD projects carried out in some of these centers, as well as new tools and modules to integrate climate consideration in macroeconomic frameworks.

Climate Capacity Development Program in the Caribbean

Christophe Duenwald, from the IMF's Western Hemisphere Department, noted that the Caribbean is the region where economic effects of natural disasters are the greatest. As a response, CARTAC implements an ambitious climate CD program.

Repeated ravaging hurricanes led the IMF and the World Bank to conduct Climate Change Policy Assessments (CCPAs) in Belize (2018), Saint Lucia (2019) and Grenada (2019). CARTAC and the IMF also carried out post hurricane reviews in Anguilla (2019), Dominica (2019), and Turks and Caicos Islands (2020). The findings from these and the CCPAs helped to lay the groundwork for the CARTAC climate program, launched in 2019 with the financial support of the United Kingdom.

CARTAC's climate program is organized around 5 workstreams. It has led to 63 technical assistance missions and trained about 500 officials in the region.

CARTAC and the IMF's Fiscal Affairs Department also conducted several climate public investment management assessments (C-PIMA) in the region to help identify potential improvements in public investment institutions and processes to build low-carbon and climate-resilient infrastructure.

C-PIMAs are often implemented ahead of funding arrangements under the Resilience and Sustainability Facility , like in the case of Jamaica .

Climate Capacity Development Strategy in the Pacific Islands

Samir Jahjah, director of PFTAC, emphasized that the center – which serves 16 Pacific Island Countries – focuses mostly on diagnostic tools to assess and strengthen public financial management (PFM) requirements across the climate finance life cycle and build PFM capacity (such as in Samoa and the Cook Islands), as well as on providing technical support to access climate finance.

More recently, there has been increasing demand from Pacific Island Countries for climate budget tagging to track climate-related expenditures in national budgets (Fiji), improved data on climate and the environment in government finance statistics, and the development of climate change and macroeconomic technical assistance and training.

IMF Climate Agenda in the Financial Sector

Joannes Mongardini, Deputy Division Chief in the IMF's Monetary and Capital Markets Department, presented the IMF's climate agenda in the financial sector. Its CD component focuses on:

  • climate finance: catalyzing climate finance by developing pipelines of resilient and climate-smart projects, developing green facilities, developing new non-debt instruments (Barbados, Jamaica); organizing technical assistance seminars (Caribbean, Southeast Asia)

  • climate-related financial stability: webinars on climate risk analysis, Financial Sector Assessment Programs in Bahamas (physical risk shock) and Maldives (climate-related physical risk focused on coastal floods), Macro Stress Test frameworks
  • climate-related financial supervision: Basel Committee on Banking Supervision guidance of supervision of climate related financial risk International Standards and International Sustainability Standards Board disclosure standards, workshops and seminars on supervision of climate related financial risk, training on a climate risk module

CD builds on extensive analytical work, reflected in the following summary.


ANALYTICAL WORK

IMF Staff Climate Notes

Global Financial Stability Reports?


Climate in Macroeconomic Frameworks

Mercedes Garcia, Division Chief in ICD, and Benjamin Carton, Deputy Division Chief in the IMF Research Department, presented new IMF models and tools on incorporating climate in macroeconomic frameworks for which demand is growing exponentially.

These include the Public Debt Dynamics Tool that includes the effects of natural disasters (ND-DDT) and general equilibrium models such as the Debt-Investment-Growth and Natural Disasters (DIGNAD) that quantifies the macroeconomic benefits of investing in resilient infrastructure amidst natural disasters.

The IMF is in the process of accelerating and scaling up the rollout of these tools, with the support of its development partners.

During the discussion, development partners commended the integration of climate CD with financing instruments (in particular the Resilience and Sustainability Facility), the close coordination with the World Bank, the crucial role of regional centers serving small island countries, the numerous C-PIMAs that have already been conducted, and the special attention to the challenges faced by SIDS. Some partners indicated their intention to expand their support on climate.

In his concluding remarks, IMF Deputy Managing Director Bo Li stated that "this engaging conversation reflected our collective commitment to action. You continue to encourage us to integrate climate issues across our CD portfolio.?Climate considerations are central to everything we do with our members."

The IMF thanks its development partners for their crucial support to climate-informed technical assistance and training.

Find out more on the IMF's climate CD in this new brochure .



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