C3A’s assessment of the emerging analytical needs of Ministries of Finance: opportunities and challenges

• Concerns common to MoFs of different countries include the risks of the transition to macroeconomic and financial stability, and how to harness opportunities for economic growth, jobs, fiscal revenues, and exports.
• Prevailing analytical approaches are ill-equipped to deal with the nonlinearity, rapid change, complexity, interconnectedness, and high scientific, technological, and policy uncertainties of the transition. Models that account for such complexities and evaluate the associated financial and fiscal risks are needed to help MoFs mainstream climate in their analyses and agendas.
• Relevant policy experience and analytical solutions are emerging, but urgently need to be piloted, refined, and upscaled, which all requires significant resources. Building capacity should be a priority to prevent bottlenecks.
• Some (though not all) MoFs consider forecasting and accelerating the deployment of low-carbon technologies as part of their mandate. This requires decision-making frameworks that evaluate risks and opportunities in the context of uncertainty, technology cost forecasts, economic models that capture structural changes and their dynamics, and tools to identify areas of potential competitive advantage in the context of the global transition.

It is a challenge that MoFs often lack teams with the responsibility to embed climate and nature within their remit, due to factors including capacity constraints, limited expertise, lack of political signals, and competing priorities. This should not be allowed to prevent strategic, holistic thinking and decision-making or the development of better analytical approaches to meet MoFs’ needs.