Fixing the Broken Governance Chain: Aligning Private Finance with the Paris Agreement

The report identifies a systemic failure in the financial sector's climate governance chain, noting that despite net-zero pledges, USD 3.7 trillion still flows annually into fossil fuels. It proposes an "impact levers" framework to move financial institutions, regulators, and cooperative initiatives from voluntary commitments to enforceable, Paris-aligned actions.

• The financial sector's climate governance chain is fundamentally broken and structurally unfit to support a Paris-aligned economy. Financial institutions (FIs), climate cooperative initiatives (CCIs), and regulators have failed to provide the necessary coordination, ambition, and accountability, making it unlikely that the sector will enable a low-carbon transformation in its current state.
• There is a significant disconnect between the public net-zero commitments of financial institutions and their actual investment behavior. An estimated USD 3.7 trillion is channeled annually into fossil fuels, including coal, gas, and oil, while voluntary CCIs like GFANZ have failed to turn pledges into real-economy decarbonisation.
• Current regulatory and market environments have failed to create the incentives required for Paris-aligned finance, and in some jurisdictions, climate alignment is actively undermined. The report suggests that regulators are best positioned to correct market failures and establish incentives through targeted interventions.
• The report proposes an "impact levers" framework to align the practices of banks, asset managers, and pension funds with climate goals. This framework aims to move CCIs toward enforceable standards and legal adoption pathways, and to embed systemic climate risks into financial decision-making at the regulatory level.

APA

NewClimate Institute (2025). Fixing the Broken Governance Chain: Aligning Private Finance with the Paris Agreement. https://newclimate.org/resources/publications/fixing-the-broken-governance-chain-aligning-private-finance-with-the-paris

Chicago

NewClimate Institute. Fixing the Broken Governance Chain: Aligning Private Finance with the Paris Agreement. 2025. https://newclimate.org/resources/publications/fixing-the-broken-governance-chain-aligning-private-finance-with-the-paris.

Wikipedia

{{cite report |author=NewClimate Institute |title=Fixing the Broken Governance Chain: Aligning Private Finance with the Paris Agreement |date=26 August 2025 |url=https://newclimate.org/resources/publications/fixing-the-broken-governance-chain-aligning-private-finance-with-the-paris |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{newclimateinstitute2025fixing, author = {{NewClimate Institute}}, title = {{Fixing the Broken Governance Chain: Aligning Private Finance with the Paris Agreement}}, institution = {NewClimate Institute}, year = {2025}, month = aug, url = {https://newclimate.org/resources/publications/fixing-the-broken-governance-chain-aligning-private-finance-with-the-paris}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }