Regulatory framework on climate risk disclosures will act as catalyst for massive green investments: John Kerry

In a statement U.S. climate envoy John Kerry said, a regulatory requirement on companies and financial institutions requiring them to disclose climate change related risks will spark huge investment flow in green capital investments across the world; he went on to add, U.S. President Joe Biden plans on issuing an executive order on the issue in the coming weeks.

Kerry made on the comments while speaking on a panel with International Monetary Fund chief Kristalina Georgieva while noting that the EU had already adopted such requirements.

He did not provide any details on the potential forthcoming executive order.

The White House did not elaborate on the comment.

The IMF was working closely with the G20 and central banks to standardize reporting of the risks along with central banks, following which they will collaborate on stress-tests for the global financial system for its response to those risks.

On Wednesday, the IMF had launched a new “Climate Change Indicators Dashboard,” which will keep economic policy decisions abreast by collating data on greenhouse gas emissions, trade in environmental goods, economic activity, government policies, green finance, and physical and transition risk.

“We have to make the invisible visible – the transition risks that banks are carrying because they’re investing in high-carbon activities that over time are going to be phased out, and the physical risk, investments in highly vulnerable coastal areas, or in agriculture that could be affected by floods or by droughts,” said Georgieva.

One of the concerns in such disclosures is that companies could be left with stranded assets – holdings that become worthless as a result of changes associated with the transition to a low-carbon economy.

During a virtual meeting on Wednesday, finance officials from the G20 felt the need for an “increasingly urgent” requirement to tackle climate change and promote environmental protection.

An IMF analysis concluded that climate risks were not sufficiently reflected in equity valuations, which could lead to economic losses, said Georgieva while adding, investment managers overseeing around $25 trillion in investments were also demanding greater transparency about such risks.

“The new IMF Dashboard will help fill data gaps, so policymakers can undertake the macroeconomic and financial analysis that underpins effective policies,” said Georgieva.

Increased disclosure of risks and new tax incentives would spark “significant amounts” of new investment to help solve climate-related problems, said Kerry.

“Suddenly, people are going to be making evaluations and considering long term risks to the investment based on the climate crisis,” said Kerry while drawing a parallels to the rise of telecommunications in the 1990s, which quadrupled the existing market.



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