Research and publications

Climate risk and IMF surveillance policy: a baseline analysis

Climate Policy, December 2021


Luma Ramos, Kevin P. Gallagher, Corinne Stephenson, Irene Monasterolo


Climate Policy, December 2021

Type : Academic Publication
Date : 04/01/2022
Keywords :

The International Monetary Fund (IMF) has been tasked with quickly devising a climate change strategy that helps its members meet collective climate change and development goals while maintaining financial stability.

In this paper, autors develop an analytical framework of the ‘macro-critical’ nature of climate change and use that framework to examine the extent to which the IMF has incorporated the macro-economic aspects of climate change in recent years. They deploy textual analysis algorithms to perform a baseline analysis of the extent to which the IMF’s main bilateral surveillance activities—Article IV reports and Financial Sector Assessment Programs (FSAPs)—have focused on climate risks between 2017 and 2021.

They find that IMF surveillance activity has paid little and uneven attention to climate risks in Article IV reports, and even less so in FSAPs. However, recent Article IV and FSAP assessments have piloted climate risk analyses that present an opportunity to be expanded and incorporated systematically. The analytical framework, baseline analysis, and methodology will allow future analysts to monitor IMF climate performance over time.


Key policy insights

  • Multilateral institutions should analyze and incorporate ‘macro-critical’ climate risks to fiscal and financial systems in their policy frameworks toolkit.
  • The IMF needs to rapidly fill this gap in the climate policy architecture through reforms to its surveillance, advisory, and lending functions.
  • The IMF, as a safeguard of monetary and financial stability, should incorporate climate risks cohesively and comprehensively into its analysis, including spillover or the cross-border consequences of climate change, and reallocate its tools and resources to this end.
  • This paper provides a method and baseline from which to evaluate the evolution of IMF policy toward incorporating climate risk into its bilateral surveillance toolkit, specifically Article IV exercises and FSAPs.



International Monetary Fund, surveillance, climate change, physical risk, transition risk, Macro-Criticality