“Making financial flows consistent with climate-resilient development”: The role of international financial institutions and standard setters

“Making financial flows consistent with climate-resilient development”: The role of international financial institutions and standard setters

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• Summary

Compounding climate, economic and geopolitical crises following the Covid-19 pandemic produced a consensus on the need for far-reaching reform of the global financial architecture to respond to contemporary challenges, including climate change.

Amid aid cuts, continued fossil fuel investments, backtracking on climate commitments by private financial institutions, geopolitical turmoil and a brewing debt crisis in the Global South — all while planetary boundaries are crossed irreversibly and climate emergencies accelerate — the core aim of Article 2.1c of the Paris Agreement becomes central to achieving sustainable development in this century: making financial flows consistent with climate-resilient development, and reforming the international financial architecture to enable this.

Yet, many of the global institutions with the power to govern, (re-)direct and regulate financial flows away from harmful activities and into climate action and a just transition are failing to do so effectively. For a long time they have claimed that climate work falls outside their “purely economic” mandates — especially institutions dominated by Global North countries. 

This briefing therefore explores the role of international financial institutions, global economic decision-making fora, financial standard setters, and multilateral finance providers in setting the conditions for aligning finance with Article 2.1c in a way that is grounded in justice and equity, both key principles of the Paris Agreement.  

It covers the UNFCCC, the G20, Financing for Development, the IMF, central banks and financial regulators, and the World Bank.

Key global processes this year — including the UN climate conference in Brazil (COP30), the Financing for Development conference, and the South Africa G20 — must not put the onus on developing countries to create enabling environments to ‘attract’ investments. Instead, the spotlight has to be on how developed countries can raise trillions in public finance for climate action annually with measures toward tax justice, debt cancellation, redirecting public finance away from fossil fuels, and reforming an unjust global financial architecture.

This report was published by Recourse in June 2025, in collaboration with the Center for Economic and Social Rights, WEDO, Oil Change International, Christian Aid, Sustainable Inclusive Solutions, Global Policy Forum and Eurodad.