Climate alignment of finance: different policy playbooks and untapped investment opportunities

Last month, countries across the world gathered at the UNFCCC Climate Meetings in Bonn to pick up discussions on the implementation of the Paris Agreement goal to make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. This key annual milestone provided an opportunity for countries to share experiences and examples on nationally-determined approaches and priorities. 

The discussions emphasised the need for robust evidence on progress and opportunities to inform policymakers committed to achieving this goal. New data from the second edition of the OECD Review on Aligning Finance with Climate Goals seeks to fill this gap and reveals varied approaches and untapped opportunities across regions. 

Effective real-economy climate policies remain essential to incentivise climate‑aligned investments. While governments have mainly relied on economic climate policies, such as taxes and subsidies, the use of other types of policies, including technology standards and government investments, has increased since the adoption of the Paris Agreement. These trends are captured by the OECD’s work to track and assess real-economy climate policies through its   Inclusive Forum on Carbon Mitigation Approaches and Climate Actions and Policies Measurement Framework.

Climate-related financial sector policies build on these foundations, but more evidence on their effects is needed. While the primary aim of financial sector policies is to maintain financial and price stability as well as market integrity, these policies can also influence climate outcomes by redirecting capital flows towards climate innovation and transition, as well as to activities that strengthen resilience. Owing to their novelty, evidence on the effects of climate-related financial sector policies remains scarce. Climate scenario analysis and sharing data across policy authorities can help strengthen the evaluation of their impacts and interaction with real-economy climate policies. 

Climate-related financial sector policies are expanding fast. While some of these policies are being paused or revised, they grew by over 25% between 2023 and 2025. As of 2025, 111 countries and EU institutions adopted over 860 such policies. Transparency measures, such as climate-related disclosure requirements, taxonomies and bond frameworks, remain dominant, accounting for 78% of the policy mix. Such policies alone cannot directly reduce GHG emissions and increase climate resilience, but they help close information asymmetries and support capital allocation decisions towards climate innovation and transition. Prudential policies, including tools that integrate climate risks into financial supervision and stress testing, made up 20%. Expanding their scope would better address climate-related risks. Climate-related monetary policies are emerging but limited, at around 2%.  

Different policy playbooks provide an opportunity for peer learning across regions. Policymakers across geographies are placing different weights on transparency measures, voluntary frameworks, risk management and supervision tools. For example, policymakers in Africa rely relatively more on transparency policies, while Europe and North America have higher shares of prudential policies, notably climate stress testing. In Eastern Asia and Oceania, disclosure requirements remain most prominent.  

While the global mix of climate-related policies is getting richer, climate alignment of finance remains low, despite progress for some financial flows and stocks. Over the past three years, climate alignment has increased across real-economy investments, syndicated loans, and bank-facilitated financing. However, progress remains uneven, with some climate-aligned flows losing momentum, such as corporate and sovereign green bond issuance. 

The levels of climate alignment in the real economy and the financial system have yet to converge. In 2024, global investment in low-carbon energy reached 7% of gross fixed capital formation, outpacing investment in fossil fuels, which stood at 4%. Yet across major financial asset classes and instruments, fossil fuel financing continues to exceed low-carbon financing. For example, green syndicated loan flows were 5% of the total for that asset class in 2025, compared with 6% for fossil fuel sectors. 

Significant opportunities exist across financial asset classes to invest in the climate transition of greenhouse gas-intensive sectors. Conventional financing to GHG‑ and energy-intensive sectors is several multiples of that to low-carbon sectors. For example, close to 30% of corporate bond and syndicated loan issuance financed activities in the energy and industrial sectors compared to a much lower percentage of green-labelled bonds, which illustrates the possibility for debt finance to play a more significant role in financing the transition of climate-relevant sectors. 

Climate alignment trends and transition opportunities vary across regions. These differences reflect varied economic structures and different climate transition needs across sectors. For example, some regions are capturing opportunities to finance their climate transition through green bonds more than others. Green‑labelled corporate bond issuance in Africa, Europe and parts of Asia-Pacific exceeds traditional corporate bonds issued by fossil fuel companies. The opposite remains true in some other parts of Asia and the Americas. Countries, therefore, need to consider approaches that reflect their economic structures, financing channels and transition priorities. 

Data and methodological gaps result in an incomplete picture. Data is very limited for private equity and bilateral loans, while approaches to assess sovereign debt remain elusive. This hinders evaluations of their role in financing climate innovation and transition in the real economy. Moreover, while transition metrics for corporate assets have been readily established, they do not yet sufficiently identify risks and opportunities associated with shifting business models. Further, the gradual inclusion of adaptation metrics into transition plans would support a more integrated view of climate actions

Stronger policy and data co-ordination can help policymakers build more effective climate-related policy playbooks and better capture untapped transition opportunities.  Governments, financial supervisors and central banks can widen policy mixes by drawing on policy innovations by peer countries. They can also strengthen their data on transition opportunities and risks by developing co-ordinated data frameworks across policy authorities, as well as strengthening the evaluation of the policy effects to inform policy updates. 

Aligning finance with climate goals is not only about managing risk. It is also about capturing opportunity. Large pools of capital could be redirected towards climate innovation, transition and resilience. For policymakers and investors alike, the benefits can be significant. Financial systems that are better aligned with climate goals increase economic resilience, foster innovation and enhance energy security. 

Capturing these opportunities requires policy co-ordination, stronger data and better evidence on what works. It will also require approaches tailored to countries’ economic structures, financial systems and transition priorities. Different policy playbooks provide an opportunity for peer learning across regions. The OECD is conducting country analysis (for example for Austria and Colombia), supporting evaluations and exchanges on what policy tools and combinations have worked across countries, and providing opportunities for peer learning to help countries identify and capture transition opportunities.