International economic institutions need to do more, individually and collectively, to support responses to climate change. Without immediate and coordinated action, the Paris Agreement goals will not only be missed but future climate-related macroeconomic shocks will be more severe.
The investment decisions made now will determine whether the world meets the ambitions of the Paris Agreement or continues on an emissions path of ‘business as usual’. Global ‘build back better’ roadmaps, put forward during the COVID-19 pandemic by many organizations within the international economic architecture, have called for climate-friendly national recovery packages. So far, these roadmaps have failed to have a substantial impact on GHG emissions. In a pattern similar to that following the 2008–09 global financial crisis, global GHG emissions are rising again, following a pandemic-related dip.
This research paper has outlined a minimum set of policy measures that need to be prioritized by institutions in the international economic architecture to support climate change mitigation and adaptation. The proposed measures include institutions expanding their own provision of climate finance, doing more to mobilize private investment, mainstreaming climate considerations through all their operations, making climate disclosures mandatory, and addressing sovereign debt distress to unlock private climate finance.
Climate change is an existential crisis facing humanity. Yet, it cannot be addressed purely as an environmental issue. There needs to be recognition that it is also a macroeconomic challenge on a global scale. The various organizations, forums, trade regimes, institutions, regulatory agencies and governance bodies that make up the international economic architecture must step up their own efforts to integrate climate action into their planning and policymaking. They must coordinate these efforts both among themselves and with other actors – including governments, private corporations and members of the climate-specific policy community. Coordination should cover both mitigation and adaptation initiatives. Although many international organizations are already taking concerted action, the climate crisis demands a far more aggressive response. Failure to do this, in the face of the growing incidence of extreme weather events, raises the potential of macroeconomic shocks or ‘climate economic crises’ linked to the emergency adoption of radical policy mitigation and adaption measures by countries around the world.
There is insufficient time and political will to undertake a wholesale reform, or reinvention, of the international economic architecture. Instead, the international community needs to work with the architecture that already exists, including its component institutions, to make it function more coherently on climate action. This can make a very substantial contribution towards meeting the Paris Agreement goals.