What Is the Paris Agreement’s Article 2.1(c) on Climate Finance, and Why Does it Matter? Key Questions, Answered

Recent studies indicate that the world will need $10 trillion annually between 2030 and 2050 to avoid the worst impacts of climate change. That’s a lot — but the world has the money.

As the Intergovernmental Panel on Climate Change (IPCC) explains, “there is sufficient global capital to close the global investment gaps … but there are barriers to redirecting capital to climate action.” The challenge, then, is not necessarily raising additional finance for climate change mitigation and adaptation, but how to align all of the world’s capital toward climate action.

Article 2.1(c) of the international Paris Agreement on climate change aims to do just that by “making finance flows consistent with a pathway towards low greenhouse gas (GHG) emissions and climate-resilient development.” However, the language of Article 2.1(c) is vague on what exactly it entails. Ten years after virtually all countries adopted the Paris Agreement, they’re still at odds over the scope of Article 2.1(c) and how it should be implemented.

Here, we explain what Article 2.1(c) is, how it interacts with other finance mandates, and what’s needed to put it into action.

What Does Article 2.1(c) Do? 

The heart of the Paris Agreement on climate change is Article 2, which sets the objectives of the agreement. Article 2.1(a) urges a global response to hold the increase in global average temperature to 1.5 degrees C (2.7 degrees F) to reduce the risks and impacts of climate change. Article 2.1(b) outlines the need to adapt to adverse impacts of climate change, build resilience and pursue low-greenhouse gas development. Article 2.1(c) points out that we need to make finance flows consistent with these objectives if we’re ever going to attain them. Finally, Article 2.2 outlines the context these articles should be pursued under, including the principles of equity, common-but-differentiated responsibility, and respective capabilities and national circumstances.

2.1(c) is a holistic goal. That means it covers both mitigation and adaptation, potentially encompassing domestic and international finance flows. It requires not just scaling up the good finance — for example, climate resilience bonds and financing for new renewable energy projects — but also scaling down funding to carbon-intensive activities, like new coal plants or diesel truck fleets. And it doesn’t stop with government spending. Depending on how it’s interpreted, it could also encompass the private sector, including financial institutions, businesses, corporations and investors.

In short, financial systems broadly must align with the pursuit of sustainable development and international climate goals. This means that all types of investments and financing activities — all investors and actors in the real economy, stock as well as flows — should be “consistent” with achieving the world’s climate goals.

2.1(c) will require economic and financial reform. The tools (e.g., policies and economic and financial instruments) for getting there will be many and varied. Innovative policies and financial instruments will surely play a role, such as green procurement (where companies and governments would be required to decarbonize supply chains) and climate-related bonds to integrate climate priorities into economic development plans.

And in order to ensure equity, alignment of financial flows will have to be customized to each country’s economic, financial and social contexts. This especially includes developing countries’ pursuit of sustainable development, poverty eradication and a just transition.

What Progress Has Been Made Toward Achieving Article 2.1(c)? 

Though a common understanding of 2.1(c) has yet to be agreed upon by Paris Agreement signatories, efforts inside and outside the UN’s Framework Convention on Climate Change (UNFCCC) are providing glimpses of what alignment could look like.

Efforts Within UNFCCC

Article 2.1(c) has been surfaced in several different forums within the UNFCCC over the past several years. These include the UN’s Global Stocktake, which concluded at the 2023 UN climate summit (COP28) and assessed progress towards the goals of the Paris Agreement, including Article 2.1(c), for the first time. In its key findings, it recognized that financial flows include “international and domestic, public and private.”

In 2022 at COP27, negotiators established the Sharm el-Sheikh (SeS) dialogue on Article 2.1(c). This brought together countries, organizations and other stakeholders to exchange views and deepen the understanding of Article 2.1(c) of the Paris Agreement and its complementarity with Article 9.

Between 2023 and 2025, six SeS dialogues were held, covering key topics including defining the scope of Article 2.1(c), identifying intended and unintended consequences of climate finance, methodologies for tracking financial flows, capacity building for the financial sector and more.

The Standing Committee on Finance (SCF), established during COP16, has two tasks related to Article 2.1(c): mapping information that contributes to the implementation of Article 2.1(c) and preparing a synthesis report (published in November 2023) analyzing how to operationalize it. The SCF provided a first report at COP27 and an updated report at COP28 for countries’ consideration.

Efforts Outside UNFCCC

Stakeholders like investors and corporations have developed frameworks to identify progress in aligning financing per Article 2.1(c). For example, WRI developed a framework and identified tools governments already have at their disposal to shift and mobilize finance. Tools are available in four categories: financial policies and regulations, fiscal policy levers, public finance and information instruments.

Investors, corporations and financial institutions have also shown some progress on Article 2.1(c) alignment.

Some are mainstreaming climate risk in their operations by applying risk management approaches, including disclosure frameworks to assess physical (e.g., fires and floods) and transitional (e.g., regulatory and technologies) risks. The theory of change is that disclosing information on climate-related risks may lead to investors deciding to shift their investments, contributing to alignment. To this end, corporations are applying the Task Force on Climate-Related Financial Disclosures  frameworks to their own risk disclosures. Even some central banks have incorporated climate-related risks into their operations.

Additionally, investors with the Glasgow Financial Alliance for Net Zero  have developed guidelines for financial institutions to align their business and operations with the goal of achieving net-zero emissions. Financial institutions including asset owners and managers, commercial banks and insurers have made commitments to back sustainable finance and phase out coal. Multilateral development banks have also rolled out principles and a joint methodology to align their operations — including both direct investment and policy-based lending — to the goals of the Paris Agreement.

What Challenges Remain to Operationalize Article 2.1(c)?

Despite incremental progress, understanding the place of Article 2.1(c) in the overall climate negotiations, defining key terms like “financial flows” and “consistent,” and addressing concerns about countries’ sovereignty all pose challenges for the international finance community to move forward.

Defining ‘Consistency of Financial Flows’

One of the key challenges to operationalizing Article 2.1(c) is that countries are using different terms and concepts to interpret the word “consistency.” These include directing, orienting, aligning, shifting, steering, scaling up, scaling down and more. Some countries argue that “consistency of financial flows” is about directing finance to green, sustainable and/or climate-related activities, regardless of the financial instruments through which such flows are channeled. The IPCC has defined it more broadly as looking at all investments, whether or not they contribute to climate objectives, including those investments that play a transition role.

However, “consistency” will require some conversation about what not to do, as well. At the very least, countries need to come to a common understanding on how to scale down misaligned investments (like financing fossil fuels) and the impact this may have on countries’ domestic policies and national development.

Concerns About Unintended Consequences

Countries have different development pathways, needs and priorities. Policies and instruments to align their financial flows will need to account for this diversity. However, because 2.1(c) is a global effort, questions will arise about standards for action and whether similar policies and regulations need to be applied in all countries. For example, if one developing country does not reform a specific set of policies, will it no longer be eligible to access climate finance? Will there be trade restrictions imposed on specific products?

The Relationship of Article 2.1(c) to Other Global Finance Goals

Article 2.1(c) is just one goal within the Paris Agreement for addressing climate change. To effectively operationalize it, it must be considered within the context of the whole agreement — especially its other finance goals.

For example, negotiators and other stakeholders like research organizations and academic institutions are examining the complementarity of Article 2.1(c) and the new collective quantified goal (NCQG). Agreed to at COP29 in Baku, the NCQG is a new finance objective that goes beyond developed nations’ goal of providing a collective $100 billion in climate finance annually. However, while Article 2.1(c) refers to all financial flows for countries that signed the Paris Agreement, the NCQG is specific to finance that supports developing countries.

Importantly, the mandate to adopt the NCQG states that the new goal must consider developing countries’ needs and priorities. Developing countries have reiterated their concern that Article 2.1(c) discussions could draw the NCQG conversations away from this focus and toward domestic policy and finance flow shifts, or lead to conditionalities or barriers to access financial support.

Through the adoption of the NCQG, negotiators reaffirmed its purpose of accelerating progress toward the achievement of Article 2 of the Paris Agreement. But questions remain over how exactly this contribution will be measured and counted toward the NCQG.

What to Watch at Future COPs

Article 2.1(c) was addressed on several fronts at previous COPs, including as part of the Global Stocktake, in reports prepared by the SCF and in outcomes of the Sharm el-Sheikh dialogue.

At COP28, developed countries suggested an agenda item focused on Article 2.1 (c), as well as a dedicated work program within the UNFCCC. Developing countries, however, expressed skepticism about this approach, on the basis that a focus on 2.1(c) could “lead to developed countries shying away from their commitments and obligations” to provide financial support to vulnerable nations. This concern was also expressed the year before at COP27.

There will be no way to meet global climate goals if countries can’t agree on how to steer finance toward a low-carbon, climate-resilient world. Investment is both the fuel and the steering wheel for arriving where we need to go. Article 2.1(c) will be complicated to operationalize, but in its very ambition, it provides a vision for the road forward.

At COP30 in 2025, it will be essential to establish both a mandate to develop the Article 2.1(c) framework as well as a roadmap for its development. Such a framework could be used as guidance for countries, covering key elements such as transparency, quality, enablers and disablers, as well as ways to transform the global financial architecture. The roadmap on the other hand should include structured dialogues or alternative formats that ensure the framework is both effectively designed and successfully implemented.

This article was originally published on Nov. 22,2023. It was updated on Oct. 30,2025, to reflect the progress needed at COP30.