Editing IPCC:AR6/WGIII/Chapter-15 (section)

=== FAQ 15.1 | What’s the role of climate finance and the finance sector for a transformation towards a sustainable future? ===

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The Paris Agreement has widened the scope of all financial flows from climate finance only to the full alignment of finance flows with the long-term goals of the Paris Agreement. While climate finance relates historically to the financial support of developed countries to developing countries, the Paris Agreement and its Article 2.1(c) have developed a new narrative that goes much beyond traditional flows and relates to all sectors and actors. Finance flows are consistent when the effects are either neutral with or without positive climate co-benefits to climate objectives; or explicitly targeted to climate benefits in adaptation and/or mitigation result areas. Climate-related financial risk is still massively underestimated by financial institutions, financial decision-makers more generally and also among public sector stakeholders, limiting the sector’s potential of being an enabler of the transition. The private sector has started to recognise climate-related risks and consequently redirect investment flows. Dynamics vary across sectors and regions with the financial sector being an enabler of transitions in only some selected (sub-)sectors and regions. Consistent, credible, timely and forward-looking political leadership remains central to strengthen the financial sector as enabler.

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