Aligning finance with net-zero emissions and climate resilience supports reaching climate policy goals, increases economic resilience, fosters innovation and enhances energy security. Climate change puts societies, economies, and the financial system at risk. Finance plays a crucial role in achieving low greenhouse gas emissions and climate-resilient development, as acknowledged in Article 2.1c of the Paris Agreement. On the one hand, finance towards climate solutions needs to be scaled up. On the other hand, investments and financing are needed for the climate transition of emissions-intensive sectors, along with reducing exposure and vulnerability to physical climate risks in all sectors, thereby strengthening economic and social resilience.
Robust evidence on progress and opportunities is needed to inform policymakers and investors across economies who are committed to aligning finance with climate goals. As shown in the first edition of the OECD Review on Aligning Finance with Climate Goals, large data gaps remain to assess the alignment of finance with climate goals. This second edition brings together best available evidence in three areas that can inform policymaking and investment decisions towards aligning finance with climate goals: the evolving mix of climate-related financial sector policies, the tracking of the degree of climate alignment of financial flows and stocks, and the landscape of climate metrics used in the financial sector.
Policymakers across continents are pursuing different policy playbooks to unlock large, untapped opportunities to transition financial flows. Policymakers globally have continued to expand the number and mix of climate-related financial sector policies, continuing trends observed in the first edition of this review. In doing so, countries across geographies adopt different policy playbooks, relying more on mandatory transparency measures, voluntary frameworks, or risk management and supervision tools. Owing to their novelty, empirical evidence on the effectiveness of these policies remains scarce. To incentivise climate-aligned investments, real-economy policies (such as fiscal instruments and regulatory standards), remain core levers, which climate-related financial sector policies build upon but cannot substitute. Since the previous edition, climate alignment has advanced for some financial flows but large opportunities to transition financial flows remain untapped. While real-economy investments in clean energy are on the rise, fossil fuel financing across most financial asset classes continues to outpace low-carbon financing. Climate-alignment trends of corporate debt instruments are diverging, with growth in green-labelled syndicated loans but shrinking momentum in the greening of bond markets since 2022. Data and metrics to track the climate alignment of finance are increasingly available, but gaps remain in identifying transition opportunities and tracking more opaque financial asset classes.
Policymakers can take a range of actions tailored to national contexts to drive the climate alignment of finance and capture untapped investment opportunities stemming from the climate transition. The 14 actions identified in this report for governments, financial supervisors and central banks can be grouped in three categories: prioritise widening policy mixes based on peer learning, develop co-ordinated data frameworks, and strengthen the evaluation of the effects of policies. As policymakers follow different policy approaches based on their national circumstances, different starting points and mandates, these actions need to be tailored to those contexts, including by complementing the global analysis presented in this report with jurisdiction-level case studies.