16 Time February 10, 2020
For years, climaTe acTivisTs have warned ThaT a
warming planet would bring devastation, disrupting not only
developing countries and coastal communities but also the
foundations of the global economy. Still, investors continue
to pump billions of dollars into fossil fuels, governments pri-
oritize policies to keep cheap oil flowing, and developers
build on land that scientists say will soon be underwater.
Kristalina Georgieva, 66, the environmental economist
who took the helm as managing director of the International
Monetary Fund in October, has spent much of her career
studying the problem. Now, she says, a slew of climate- related
disasters have finally awakened the financial sector and the
economic leaders who guide it. “The tide is turning,” she
told TIME in a Jan. 23 interview at the annual meeting of the
World Economic Forum in Davos, Switzerland.
Georgieva plans to take advantage of this moment. The new
chief of the IMF described a range of measures the global fi-
nancial institution will take to prioritize climate change during
her five-year term: supporting policies that require investors to
disclose climate vulnerability, measuring a country’s financial
situation in part by its preparation for climate change, push-
ing countries around the globe to implement a carbon tax. “We
have to create the right policy environment that is based on
sound economics,” she says. “I’m prioritizing this for the Fund.”
At a time when much of the climate conversation cen-
ters on flashy policy prescriptions like the Green New Deal
The world of finance
groggily awakens
to climate change
By Justin Worland/Davos, Switzerland
proposed by congressional Democrats,
the climate policy of the IMF and the
changing tune of the financial sector
may sound wonky. But the climate chal-
lenge is unlikely to be met without the
financial sector—and the authorities
that regulate and govern it—on the right
side of the fight. For decades, banks
have given fossil-fuel companies the fi-
nancing to mine and drill; meanwhile,
governments have provided seemingly
bottomless subsidies, some $5 trillion
annually, the IMF said last year. At the
same time, banks have largely ignored
the risk that climate change poses to
their customers, from businesses in the
flood zone to homes in fire-prone areas.
At Davos, there were hints this may
be changing. Just a few days before the
conference, BlackRock, the world’s larg-
est asset manager, said climate change
would lead to a “fundamental reshap-
ing of finance” and promised to rethink
its strategy. Microsoft pledged to go
carbon-negative in a decade and remove
by 2050 a sum of carbon equivalent to
all that the company has ever emitted.
The value of assets under management
in the Net-Zero Asset Owner Alliance, a
group of investors committed to having
a zero- emissions portfolio by 2050, grew
to more than $4.3 trillion. And the IMF
warned that climate change “already en-
dangers health and economic outcomes.”
“I don’t want to be naive, but I want
to acknowledge that the center of the
global economy is now saying things
that many of us have dreamed they
might for a long time,” former Vice
President Al Gore said at a dinner at
Davos convened by WWF. “They’re say-
ing them forcefully and eloquently.”Two broad climaTe risks domi-
nated the discussion among corporate
executives and investors in Davos: physi-
cal risk and so-called transition risk.
The former is obvious. Climate change
drives extreme weather events and di-
sasters, from flooding and drought to
wildfires and heat waves, which can de-
stroy infrastructure and devastate econ-
omies. IMF data shows that even seven
years after a devastating tropical storm,
a country’s GDP per capita remains 1%
lower than it would have been otherwise.
Transition risk refers to the possibil-
ity that companies may get left behindTheView Economy
SIKARIN FON THANACHAIARY—WORLD ECONOMIC FORUM
△
Georgieva
took office
as managing
director of the
International
Monetary Fund
in October