The Money Article of Paris
Most people think the Paris Agreement is just about cutting carbon emissions. But one short clause — Article 2.1(c) — quietly shifted the focus to money:
“Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.”¹
This line made climate action as much about finance as about emissions. If you can control where the money flows, you can control the speed and direction of change. You don’t need a new law every time — you can make the markets enforce it.
Meet GFANZ – The Umbrella Bloc
The Glasgow Financial Alliance for Net Zero (GFANZ) was launched in 2021 at COP26 by Mark Carney, Michael Bloomberg, and Mary Schapiro². It’s a network of smaller alliances — the Net Zero Banking Alliance (NZBA), Net Zero Asset Managers (NZAM), Net Zero Insurance Alliance (NZIA), and more — all pledging to line up their investments with the Paris Agreement.
From the start, GFANZ made its goal clear: turn Article 2.1(c) into action through private-sector finance. The plan wasn’t about government funding — it was about re-directing trillions in private capital to projects and companies that meet “Paris-aligned” standards.
The Levers – How Private Standards Become Policy
GFANZ and its partners use a few main tools. These are technically “voluntary,” but in practice, they often set the rules of the market:
- Race to Zero Criteria – These require companies to pledge, plan, and publish their path to net zero, including targets for supply chains and deadlines for phasing out fossil fuels³. Even a weaker version can push banks and investors to add climate terms to loans and contracts.
- Loan and Underwriting Conditions – NZBA-aligned banks can raise costs or deny capital to fossil-heavy businesses, including state-run utilities, unless they show a Paris-aligned transition plan⁴.
- Index and Investment Rules – GFANZ helps design “transition” indexes. If an index requires Paris alignment, any fund that tracks it must follow those rules⁵.
This creates policy by proxy — markets enforcing changes that normally would need legislation.
The Soft Power Problem – Antitrust Fears and Strategic Retreat
In 2022, Race to Zero added stronger language on fossil fuels. That caused pushback from U.S. banks worried about antitrust lawsuits — the idea that coordinated action could be seen as a “climate cartel.” By the end of that year, GFANZ dropped the requirement for members to join Race to Zero⁶.
The insurance sector backed out even faster. In 2023, several major insurers left the NZIA over similar concerns⁷.
The exits keep coming. In July 2025, HSBC announced it was leaving the Net Zero Banking Alliance, one of GFANZ’s core groups. The official explanation was low-key, but online reaction was loud.
Some saw it as a win against ESG finance; others as a quiet rebrand to avoid political pressure while still moving money in the same Paris-aligned ways.
Article 2.1(c) as the Sovereignty Hinge
Groups like the World Resources Institute now treat Article 2.1(c) as its own global finance goal, separate from direct climate spending⁸. This opens the way for regulators, central banks, and private rulemakers to push Paris compliance through indirect means — securities laws, credit ratings, and stock market listing rules.
The EU’s sustainable finance taxonomy is an example. It uses Paris goals to decide what counts as “green” investment⁹. Once these definitions exist, they ripple through other markets, changing which projects can get funding.
Credit ratings are also shifting. The IMF has linked climate risk to sovereign borrowing costs — if a country isn’t Paris-aligned, it could face higher interest rates¹⁰. That’s a market penalty without a single vote in parliament.
The Greenwash vs. Coercion Paradox
GFANZ faces two opposite criticisms: that it’s watering down its standards, and that it’s forcing unwanted change. Both can be true. Looser rules help keep members from quitting, but the remaining rules still push huge amounts of capital toward Paris goals.
For smaller or cash-strapped regions, that means adjusting policy to keep investment flowing. For bigger economies, it means letting private finance set the limits of what’s possible.
Conclusion – Capital as Policymaker
GFANZ is not a government. But under the Paris Agreement’s finance clause, it doesn’t have to be. By building Paris alignment into the way global finance works, it can deliver treaty goals without going through legislatures — or the public.
That’s efficient. It’s also a bypass of sovereignty. And in a place like Newfoundland — or any resource-heavy, capital-poor region — the question remains: when the next “transition” project arrives, will the decision be made in your parliament… or in a loan agreement drafted in London, New York, or Toronto?
References
[1] United Nations. Paris Agreement, Article 2.1(c). 2015. https://unfccc.int/sites/default/files/english_paris_agreement.pdf
[2] Glasgow Financial Alliance for Net Zero (GFANZ). About GFANZ. 2021. https://www.gfanzero.com/about/
[3] UNFCCC Race to Zero. Criteria and Interpretation Guide. 2022. https://www.climatechampions.net/media/qshidlrl/race-to-zero-criteria-interpretation-guide-eprg.pdf
[4] Net Zero Banking Alliance (NZBA). Commitment Statement. 2021. https://www.unepfi.org/net-zero-banking/signatory-statement/
[5] GFANZ Publishes Draft Guidance on “Transition-Informed” Indexes. October 2024. Responsible Investor. https://www.responsible-investor.com/gfanz-publishes-draft-guidance-on-transition-informed-indexes/
[6] GFANZ Drops Partnership with UN’s Race to Zero. October 2022. Investment Week. https://www.investmentweek.co.uk/news/4058968/gfanz-drops-partnership-uns-race-zero
[7] McGowan, J. (2023). “Insurers Leave U.N. Climate Alliance Over ESG Pushback And Antitrust Claims.” Forbes. https://www.forbes.com/sites/jonmcgowan/2023/05/26/insurers-leave-un-climate-alliance-over-esg-pushback-and-anti-trust-claims/
[8] World Resources Institute. What Is the Paris Agreement’s Article 2.1(c) on Climate Finance, and Why Does it Matter? Key Questions, Answered. 2024. https://www.wri.org/insights/article-2-1-c-paris-agreement-explained
[9] Hohl, S., & Schäfer, H. (2021). The EU Sustainable Finance Taxonomy and Its Contribution to Climate Neutrality. ResearchGate. https://www.researchgate.net/publication/356877410_The_EU_sustainable_finance_taxonomy_and_its_contribution_to_climate_neutrality
[10] International Monetary Fund (IMF). Climate Risk and Sovereign Credit Ratings. 2024. https://www.imf.org/-/media/Files/Publications/WP/2024/English/wpiea2024032-print-pdf
[11] Averchenkova, A., & Bassi, S. (2016). Beyond the Targets: Assessing the Political Credibility of Pledges for the Paris Agreement. Climate Policy, 16(6), 791–811. https://doi.org/10.1080/14693062.2016.1191009
[12] Campiglio, E., Dafermos, Y., Monnin, P., Ryan-Collins, J., Schotten, G., & Tanaka, M. (2018). Climate Change Challenges for Central Banks and Financial Regulators. Nature Climate Change, 8(6), 462–468. https://doi.org/10.1038/s41558-018-0175-0
[13] Organisation for Economic Co-operation and Development (OECD). OECD Review on Aligning Finance with Climate Goals: Assessing Progress to Net Zero and Preventing Greenwashing. 2024. https://www.oecd.org/en/publications/oecd-review-on-aligning-finance-with-climate-goals_b9b7ce49-en.html