Hello, Lykkers! Ten years ago, the Paris Agreement changed how the world thought about climate action. Today, it is changing something arguably more powerful: where the money goes.

International climate agreements are no longer abstract diplomatic documents—they are actively reshaping global energy investment flows, creating new financial instruments, and determining which projects get funded and which do not.

The Investment Shift Since Paris

The numbers speak for themselves. Since the Paris Agreement was adopted in 2015, investment flows in energy supply and usage have shifted significantly.

According to the International Energy Agency (IEA), investments in clean technologies are expected to reach approximately USD 2.2 trillion in 2025, while investments in fossil fuels have decreased by one-fifth to an estimated USD 1.1 trillion. Renewable energy has seen the most dramatic growth, with investment volumes increasing from USD 374 billion to USD 780 billion over the past decade. Solar panels have now been the cheapest source of new electricity for years, and wind and solar together generated more power than coal worldwide for the first time in 2025.

This is not a coincidence. The Paris Agreement created a framework of national commitments—known as Nationally Determined Contributions (NDCs)—that gave investors policy visibility. More than 70% of global emissions are now covered by an updated NDC, providing firmer expectations on national policy corridors, which is essential for sector allocation and risk pricing. As one investment analysis notes, despite ongoing fragmentation across different regions, investments in renewables are still double those of fossil fuels, displaying technological progress and the viability of low-carbon alternatives.

Article 6: The Carbon Market Game-Changer

Perhaps the most significant development is the finalisation of Article 6 of the Paris Agreement at COP29 in Baku, November 2024. This long-debated provision finally opened the door to international carbon trading between nations. The framework allows countries to trade emission reductions with one another, creating a new asset class in global finance.

The implications are substantial. Most national carbon action plans under the Paris Agreement now integrate carbon markets. The European Union has agreed that, from 2036, high-quality international credits may make a limited contribution towards its 2040 climate target. At COP29, parties agreed standards for the Article 6.4 mechanism, supporting the operation of a centralised UN carbon market. For investors, operational Article 6 pilots and new international coalitions are paving the way for more liquid, high-integrity carbon markets.

The $300 Billion Pledge and the $1.3 Trillion Gap

At COP29, developed nations pledged to increase climate finance for developing countries to USD 300 billion annually by 2035, replacing the previous goal of USD 100 billion. This "New Collective Quantified Goal on Climate Finance" was a step forward—but it still falls short of the estimated USD 1.3 trillion per year needed for developing economies to transition.

As Gauri Singh, Deputy Director-General of the International Renewable Energy Agency (IRENA), has emphasised, scaling up energy transition and investment requires mobilising public and private sector financing supported by international collaboration and robust enabling policies. She has noted that public funds must be deployed to de-risk investment, leverage private capital, and provide low-cost, long-term financing for energy transition projects.

The Persistent Cost-of-Capital Challenge

This is where the real challenge lies. A solar project in Germany can access financing at 2–3 percent, while the same project in Nigeria faces rates of 15 percent or more. The technology is identical; the sun shines brighter in Lagos. But the cost of capital can double or triple the final price of a kilowatt-hour. This structural pattern constrains the energy transition where it is most urgent.

This is where public climate finance must play its most critical role—not as charity, but as leverage. Every dollar of concessional public finance, deployed wisely, can de-risk private investment and unlock multiples of itself. Blended finance, which combines concessional public finance with commercial investment, reached USD 11.6 billion for climate uses in 2023, but this remains a small fraction of the wider equation. The tools exist—guarantees, first-loss tranches, currency-hedging facilities, blended-finance structures—but their scale remains inadequate.

Regional Progress and Persistent Gaps

Despite these challenges, progress is visible. Emerging markets outside mainland China have nearly tripled renewable investment since 2015, led by a surge in small-scale solar. In Europe and Central Asia, major regional programs were launched in 2024, committing billions in financing to mobilise significant private capital over the coming decade. Yet emerging markets captured only about 18% of global clean energy spending over the past decade, with less than one percent reaching low-income countries. The concentration of capital and nonbinding targets signal the need for more predictable markets and cheaper financing.

Final Thoughts

International climate agreements have moved from setting targets to shaping financial reality. The Paris Agreement created the framework; subsequent COPs have built the machinery. Article 6 opened carbon markets, the NCQG set new finance targets, and national NDCs provide the policy signals investors need. The challenge now is not creating new rules but ensuring capital flows to where it is needed most. As the world enters the post-Paris decade, the question is no longer whether climate finance will grow, but whether it will grow fairly.