Aligning Policy-Based Finance with the Paris Agreement

This research paper by the World Resources Institute proposes a framework for aligning policy-based operations (PBOs) from multilateral development banks (MDBs) with the Paris Agreement, focusing on ensuring that unearmarked budget support does not undermine climate neutrality by 2050.

• Current risk screening procedures for policy-based operations (PBOs) are inadequate for preventing policy actions from hindering a just transition to climate neutrality by 2050 or undermining long-term macro-fiscal stability. These actions may create path dependence in fossil fuels and agriculture, while existing diagnostics fail to systematically assess institutional capacity for climate action or a country's macro-fiscal exposure to climate risks. Additionally, social impact assessments do not yet account for the needs of a just transition in sectors vulnerable to climate change.
• While most PBOs have the potential to support Paris alignment and development goals through country dialogue and development partner coordination, MDBs currently fail to mainstream Nationally Determined Contributions (NDCs) into the development plans that guide their activities. Furthermore, there is limited evidence regarding the benefits of climate-related reforms.
• The paper defines PBOs as Paris-aligned if their policy actions do not increase social, fiscal, or macroeconomic exposure to climate risks—thereby not undermining a just transition to climate neutrality—and if they promote long-term macro-fiscal resilience and a just transition wherever possible.
• Budget support represents a significant portion of MDB commitments, accounting for US$139 billion (38 percent) between 2015 and 2020. This percentage typically ranges from 10–25 percent but increases to 30–60 percent during crises like COVID-19. In 2020, over 75 percent of the 39 low-income countries at high risk of or already in debt distress received a PBO from an MDB, primarily for emergency relief.

APA

World Resources Institute (n.d.). Aligning Policy-Based Finance with the Paris Agreement. https://www.wri.org/research/aligning-policy-based-finance-paris-agreement

Chicago

World Resources Institute. Aligning Policy-Based Finance with the Paris Agreement. n.d. https://www.wri.org/research/aligning-policy-based-finance-paris-agreement.

Wikipedia

{{cite report |author=World Resources Institute |title=Aligning Policy-Based Finance with the Paris Agreement |url=https://www.wri.org/research/aligning-policy-based-finance-paris-agreement |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldresourcesinstitutendaligning, author = {{World Resources Institute}}, title = {{Aligning Policy-Based Finance with the Paris Agreement}}, institution = {World Resources Institute}, url = {https://www.wri.org/research/aligning-policy-based-finance-paris-agreement}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }