Future of IMF’s climate work uncertain, as climate crisis intensifies
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Article summary
- Despite escalating economic costs of climate impacts and primacy of greentech in geopolitical tensions, US insists climate not ‘core’ to Fund’s work.
- Influence of IMF’s largest shareholder risks deepening IMF crisis of legitimacy.
- Key policy reviews set to outline future of IMF’s climate work.
The future of the IMF’s efforts to mainstream climate into its work – a key priority of IMF Managing Director Kristalina Georgieva during her first term – appears uncertain, given growing hostility from the US, the Fund’s largest shareholder to this agenda.
US Treasury Secretary Scott Bessent made no secret of the US’s position on the issue during a speech on the sidelines of the World Bank and IMF Spring Meetings at the International Institute of Finance in April. “The IMF… [now] devotes disproportionate time and resources to work on climate change, gender, and social issues,” Bessent said. “These issues are not the IMF’s mission. And the IMF’s focus in these areas is crowding out its work on critical macroeconomic issues,” he added.
The US’s position that climate is not ‘core’ to the IMF’s work is at odds with rapidly escalating economic damages from the climate crisis and the interlinkages between green technology and renewed geopolitical tensions – both of which are increasingly shaping countries’ macroeconomic and financial stability, which are fundamental to the Fund’s mandate.
Mohamed Nasheed, Secretary-General for the Climate Vulnerable Forum (CVF), noted in a 27 August op-ed in Newsweek that the climate emergency risks triggering a full-blown debt crisis among the 74 climate-vulnerable developing countries represented by the CVF’s V20 Group, which are home to 1.7 billion people. “[V20 countries have] $746 billion in debt service payments due between this year and 2031 – about four times our financing needs to support our climate plans,” Nasheed wrote. “This is a crippling burden for countries facing escalating costs in climate damages caused by a crisis we did little to create. We need to speak about climate debt. Our historical carbon emissions are miniscule; we are the carbon creditors; high emitting countries are the debtors,” he added.
Following a 11 September Bloomberg report that the IMF’s climate and gender teams have been integrated into a larger unit, the role of climate in the IMF’s work is set to be re-litigated in two forthcoming reviews, the Comprehensive Surveillance Review (CSR; see Observer Summer 2025) and the Review of Conditionality (RoC; see Observer Autumn 2025). The Fund’s Independent Evaluation Office is also working on an evaluation of the IMF’s climate work since the launch of its 2021 climate strategy (see Observer Autumn 2021), which is due to be published next year, and will require a response from Georgieva and the Fund’s executive board. Taken together, these events mark a pivotal movement for the future of the IMF’s climate work.
Unfinished business: IMF’s approach to climate remains fragmented
Despite Georgieva’s surreal assertion that the IMF has “no climate experts” during a press conference at the Spring Meetings (see Dispatch Springs 2025), in reality, the IMF’s climate work has accelerated since 2019, with the Fund positioning climate as core to its work from 2021 via its inclusion in the Comprehensive Surveillance Review undertaken that year (see Observer Summer 2021) and a staff climate strategy released shortly thereafter (see Observer Autumn 2021). The IMF’s shareholders also approved the creation of the Resilience and Sustainability Trust in 2022, which has a mandate to help countries address future balance of payments needs related to climate change (see Inside the Institutions, What is the IMF Resilience and Sustainable Trust?).
However, new research from international civil society organisation Recourse published on 6 October found that the IMF’s growing focus on climate is uneven – and is often in tension with its austerity-based advice in loan programmes and surveillance. Reviewing the IMF’s surveillance since 2022, Recourse found that the IMF remains largely focused on long-standing priority issues such as carbon pricing and consumer fuel subsidy removal, typically foregoing a fuller analysis in its surveillance of what types of green finance are needed to ensure a whole-of-economy transition to achieve global climate goals while preserving macro-stability. Its integration of climate into its debt sustainability assessments also remains limited.
“The IMF has made extremely slow progress in supporting countries’ fulfilment of the Paris Agreement goals,” said Federico Sibaja of Recourse. “The CSR and the RoC should be the opportunity to address these issues, but the calls by the current US administration to stop the climate work altogether risks undermining this,” he added.
IMF staff research in recent years, meanwhile, has flagged a number of ways in which climate is a “critical macroeconomic issue” – but these findings have yet to be fully integrated into IMF policy. For example, a 2023 IMF research paper on the potential ‘spillover effects’ associated with an uncoordinated transition to a low-carbon energy future found that, “During the ‘mid-transition’ period [when renewable energy increasingly displaces fossil fuels],…cross-border risks could generate or exacerbate instability in the economic, political, and financial spheres, which may become detrimental to the global transition process itself.”
The apparent chilling effect of the new US administration on climate policy at the Fund – amid the US’s wider war on climate science and withdrawal of pledged international climate finance – means that such a chaotic transition is becoming increasingly likely. In this context, the IMF’s fragmented approach to climate could deepen its ongoing crisis of legitimacy, as its largest shareholder becomes a climate action pariah (see Observer Autumn 2025).
