Daily Management Review

IMF Warns Stock Markets Paying Least Attention To Climate Crisis


IMF Warns Stock Markets Paying Least Attention To Climate Crisis
The International Monetary Fund has warned that the increasing number of natural disasters that have taken place in the last 50 years have been generally ignored by equity markets and there is immediate need of formulating tougher rules to make investors aware about the threat of climate change and climate crisis.
The IMF said in a chapter from its latest global financial stability report (GFSR) that exposure of companies to climate risk needs to be mandatorily disclosed by them since the voluntary approach has not worked to satisfaction.
An outline of how companies should calculate and disclose their exposure to climate risk to investors was provided by the Task Force on Climate Related Financial Disclosures, which is led by the former Bank of England governor Mark Carney.
Climate risk should ultimately be made part of international reporting standards, the IMF, however, said in a GFSR published earlier this week.
“An increasing number of firms have begun to voluntarily disclose climate change risk information, in line with the recommendations set out by the taskforce on climate-related financial disclosures” it said.
“However, going further by developing global mandatory disclosures on material climate change risks would be an important step to sustain financial stability. In the short term, mandatory climate change risk disclosure could be based on globally agreed principles. In the longer term, climate change risk disclosure standards could be incorporated into financial statements compliant with international financial reporting standards.”
The role of IMF primarily is to act as a last resort for countries that face financial difficulty by bailing them out. It also deals with issuing policy advice. The rise in global temperatures and its consequences are being ignored by stock markets, said a concerned IMF in its latest statement on the climate crisis.
The period before the spread of the cvoid-19 pandemic across the world was the bets for global stock markets since 2009 when the global financial crisis was just over, even though there has been a fall in the markets since the pandemic hit the global economy.
There were a series of severe bad weather incident last year which included flooding in the US and bushfires in Australia. The IMF has warned that these are just parts of a trend and there has been a ‘considerable’ increase in the number of natural disasters in the past few decades.  There were about 50 major natural disasters since the early 1980s till the 2000 and since then there has been 200 natural disasters. The IMF mentioned how in 2005, New Orleans was devastated by Hurricane Kartrina and the strike of Hurricane Maria struck 2017 resulted in damage amounting to more than twice its GDP for Dominica.
“Climate change induced by this level of warming is, in turn, expected to adversely impact the world’s stock of natural assets, lead to a significant rise in sea level, and increase the frequency and severity of extreme weather event,” the IMF said. “As the frequency and severity of climatic hazards rise, the resultant socioeconomic losses could be significantly higher than in recent history.”