IMF calls for Apac climate data overhaul

IMF calls for Apac climate data overhaulThe introduction of climate labels and climate impact scores will help ESG funds allocate more assets to Asian companies, according to the International Monetary Fund (IMF). A research paper from the IMF, Unlocking Climate Finance in Asia-Pacific: Transitioning to a Sustainable Future, has highlighted gaps in climate finance data, disclosure and taxonomies within Asia Pacific. Addressing these deficiencies could help to reduce a US$800 billion shortfall in climate financing in the region by attracting more investment from global ESG funds. The paper draws on a survey of 19 countries in the Apac region based on the challenges around climate financing. It found that 89%  of respondents cite data gaps and a lack of capacity in firms to analyse available information for risk identification and reporting as the main challenges. The paper goes on to cite a lack of interoperable and comparable taxonomies and the lack of accurate climate labels as further challenges. “Current methodologies of ESG rating agencies do not reward emerging market and developing economies that implement climate policies,” stated the report. “Low scores may unfairly penalise Asian emerging market as ESG funds allocate only a small share of their portfolio to emerging markets assets, and this allocation is mostly concentrated in major emerging market economies such as China.” While the IMF states that alternative metrics to ESG scores may better capture sustainability and climate impact, it also recognises that this will require cooperation at a technical level between regulators and supervisors globally. “Coordination through multilateral standard setters such as the International Organization of Securities Commissions could be useful to develop staff-level expert analyses and policy recommendations to align ESG scores to climate outcomes, enabling reliable insights and comparisons across firms,” states the paper. ©2024 funds global asia

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