Integrating Climate Risk in Public Financial Management: Innovations in Fiscal Accountability

Abstract

This study examines how public financial management (PFM) systems can integrate climate risk considerations to strengthen fiscal accountability and resilience. The main question addressed is how innovative fiscal tools and governance mechanisms can enhance the capacity of governments to anticipate, manage, and disclose climate-related fiscal risks. Using a systematic literature review of peer-reviewed studies, the article synthesizes evidence on climate-informed budget tagging, public investment management, fiscal risk statements, and risk transfer instruments. The findings reveal that these tools, when supported by institutional capacity, political will, and stakeholder oversight, significantly improve transparency, fiscal predictability, and public trust. The discussion highlights both successful practices and persistent challenges, such as data limitations, fragmented mandates, and biases toward post-disaster spending. The study concludes that climate-integrated PFM offers a strategic opportunity for proactive governance, enabling states to align fiscal priorities with long-term climate resilience and equitable development goals.