Aligning policy-based finance with the Paris Agreement

This research paper by the NewClimate Institute examines the alignment of 'policy-based operations' (PBOs)—unearmarked loans provided by public development banks in exchange for institutional reforms—with the Paris Agreement. The authors argue that current lending practices may undermine just transitions to carbon neutrality and propose a framework based on the 'do no significant harm' principle to ensure PBOs do not increase climate risk exposure and instead promote macro-fiscal resilience.

• Public development banks utilize 'policy-based operations' to provide unearmarked loans to countries in exchange for institutional and policy reforms, a practice that became a significant portion of lending during the COVID-19 pandemic.
• There is currently a lack of published approaches from banks on how to align PBO lending with the Paris Agreement, which creates a risk of undermining just transitions to global carbon neutrality by 2050, particularly as these policy actions influence emissions patterns and climate vulnerability.
• The paper proposes that PBOs are Paris-aligned if their policy actions avoid increasing macroeconomic, fiscal, or social exposure to climate risks and, where possible, support long-term macro-fiscal resilience and a just transition to climate neutrality.

APA

NewClimate Institute (2022). Aligning policy-based finance with the Paris Agreement. http://www.newclimate.org/resources/publications/aligning-policy-based-finance-with-the-paris-agreement

Chicago

NewClimate Institute. Aligning policy-based finance with the Paris Agreement. 2022. http://www.newclimate.org/resources/publications/aligning-policy-based-finance-with-the-paris-agreement.

Wikipedia

{{cite report |author=NewClimate Institute |title=Aligning policy-based finance with the Paris Agreement |date=27 October 2022 |url=http://www.newclimate.org/resources/publications/aligning-policy-based-finance-with-the-paris-agreement |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{newclimateinstitute2022aligning, author = {{NewClimate Institute}}, title = {{Aligning policy-based finance with the Paris Agreement}}, institution = {NewClimate Institute}, year = {2022}, month = oct, url = {http://www.newclimate.org/resources/publications/aligning-policy-based-finance-with-the-paris-agreement}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }