Achieving net-zero emissions and resilience to climate change requires aligning finance with such goals, going beyond climate-related financial risk management. Financial flows and stocks could be considered aligned with the Paris Agreement if they support socio‑economic systems that are consistent with low-greenhouse gas emissions and climate‑resilient development pathways. This involves scaling up finance for activities contributing to climate goals (including climate solutions and transition activities), and redirecting finance away from activities undermining climate mitigation and resilience goals.

Public and private actions to better align finance with climate goals need to be informed by robust assessments of progress. In the absence of a common framework to track progress, available evidence on best practices, finance volumes, and actions is currently scattered and incomplete. This inaugural edition of the OECD Review on Aligning Finance with Climate Goals contributes to an improved and more coherent knowledge base by bringing together best‑available evidence in relation to three core questions: (i) How is climate alignment of finance assessed? (ii) What do we know about the current climate alignment of finance? (iii) What financial sector policies and actions influence the climate alignment of finance?

Climate-alignment assessments require methodological transparency and a set of complementary metrics to address greenwashing risks. Different methodological assumptions, such as the choice of reference scenario, can lead to diverging results. Where assumptions are not communicated, this can lead to greenwashing, as preferred results can be cherry picked. Relying on a robust set of complementary metrics provides a more complete and accurate view on progress towards transition plans and alignment.

While data and methodologies have improved, comprehensive alignment assessments for climate mitigation are not yet possible for all layers of finance and remain exploratory for climate resilience. Such assessments would need to cover all layers: real‑economy investments, financial assets across asset classes, financial institutions, and financial jurisdictions. Methodologies and data availability across layers and metrics are still maturing. As climate‑alignment assessments are currently not possible for all finance flows and stocks, blind spots can hide misaligned activities, thus contributing to greenwashing. However, remaining gaps should not prevent progress assessments based on best-available estimates of finance contributing to or undermining climate goals placed in the context of total finance volumes.

Available evidence on finance flows and stocks remains very partial but points to a continued overall low degree of alignment of finance with climate change mitigation goals. For real‑economy investments, new investments in clean energy reached USD 1.7 trillion in 2022, surpassing USD 1.5 trillion for fossil fuels but representing a small share of total investments. Across financial asset classes, while many significant blind spots persist, especially for private equity and loans, estimates for listed equity and corporate bonds highlight a low degree of alignment. For example, low-carbon energy supply accounted for only 4% of global listed equity, compared to 10% for fossil fuel supply. At the level of financial institutions, available estimates of climate alignment also remain limited, despite the involvement of commercial banks and institutional investors in various climate coalitions. Banks continue to finance fossil fuel supply heavily, with an estimated USD 1 trillion allocated in 2022, compared to USD 0.7 trillion for low‑carbon energy. Tracking efforts at the level of financial jurisdictions and national financial accounts are ramping up and can more coherently bring together all layers of finance.

Real‑economy policies remain fundamental levers to increase the climate alignment of finance, but the role of financial sector policies cannot be ignored. Governments use a range of real‑economy policies that influence the attractiveness of climate‑relevant investments. As climate change poses risks to financial and price stability, as well as market integrity and efficiency, climate considerations are being integrated in financial sector policies. However, climate‑related financial sector policies may also influence the climate‑alignment of finance, either as an unintended consequence or, depending on the mandate, an intention to contribute to aligning finance with climate goals.

Financial sector policies integrating climate change‑related considerations have more than quadrupled since the Paris Agreement, mainly in the form of transparency and information policies. By 2023, 77 countries had adopted climate‑related transparency and information policies, 41 had climate‑related prudential policies, and 16 had climate‑related credit allocation policies. Climate‑related transparency and information policies were mainly adopted by supervisory and regulatory authorities or governments. Within this policy area, 55 countries had put in place disclosure policies and 70 countries established climate‑related finance guidelines, which can include taxonomies. Climate‑related prudential policies have mostly taken the form of climate‑related risk management and supervision policies adopted by central banks. There is no consistent data collected on climate‑related monetary policies yet.

Common understanding of the effects of climate‑related financial sector policies remains primarily based on conceptual analysis and assumptions. Limited theoretical and empirical analysis is available on the effects of climate‑related financial sector policies on financial and climate policy objectives. For example, current analysis expects strong trade‑offs for climate‑related capital prudential policies and monetary credit operations. It also assumes that some leverage, risk management and supervision, and large exposure policies could positively contribute to both policy objectives. Where available, expected effects based on conceptual analysis are not always confirmed by theoretical and empirical research.

Policymakers can take individual and coordinated actions to better align finance with climate policy goals and improve evidence that informs practices with impacts in the real economy. Based on the evidence compiled in this review, they can the following key actions.

• Governments can: (a) develop mandatory disclosure requirements that are interoperable across jurisdictions, covering key complementary metrics that relate to impacts on emissions and resilience; (b) support assessments through improved availability of granular input data and reference points, including for climate resilience; and (c) identify and revise policies incentivising and enabling domestic and international financial flows going to climate‑misaligned activities.

• Financial system policymakers can: (a) collect and make public, to the extent possible, detailed data on finance exposed to activities contributing to or undermining climate goals, (b) develop disclosure requirements of core complementary metrics for financial institutions, and (c) where consistent with their mandates, consider the impacts of existing policies on climate goals.

Financial sector stakeholders need to mainstream climate‑related considerations and better understand impacts on real‑economy emissions and resilience. Investors and financial institutions can assess and disclose impacts of climate‑related actions and unintended consequences of existing practices. Data and rating providers need to develop assessments across all asset classes and layers of finance to address current blind spots, especially for climate‑misaligned finance. Researchers can develop further theoretical and empirical analysis on impacts of climate‑related policies to inform their design.

Evidence informing policies and actions to better align finance with climate goals should be based on robust assessments, following good practices on methodologies and metrics. This review identifies five good practices to ensure the integrity and policy relevance of alignment assessments: (i) place best‑available estimates of finance to activities contributing to or undermining climate goals in the context of total finance flows and stocks; (ii) rely on a set of core complementary metrics across layers of finance; (iii) disclose methodological assumptions; (iv) assess the reliability and comparability of input data; and (v) rely on credible and ambitious reference points against which to assess climate alignment.