Takeaways

How private finance is shaping the climate transition

Tracking how 1,500 private finance institutions are making real-economy Impact through climate Targets and Implementation

A path for climate action

The financial system will shape whether the global economy transitions along a low-carbon, climate-resilient pathway or remains locked in emission-intensive systems that accelerate climate risks.

The world’s largest financial institutions are rapidly expanding their climate target-setting and improving implementation actions. However, weak quality and uneven progress in these areas—and continued dominance of fossil fuel financing—leave portfolios at risk.

Regulatory support, engagement with industry groups, and transition plans are emerging as key levers for progress.

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IMPACT

Clean and transition finance is growing, but fossil fuels remain high

Direct finance for clean and transition energy projects reached USD 114 billion in 2024, a 130% increase since 2019. While this represents 65% of the total energy project finance tracked, the remaining 35% going to new fossil fuel projects undermines progress and exacerbates risks. Corporate finance remains even more fossil-heavy: 70% of banks’ new energy finance credit went to fossil fuel activities. In addition, 74% of private financial institutions' energy holdings were in fossil fuels, mostly in companies expanding their operations.

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IMPACT

Explore the capital contributed to clean, transition, and fossil-fuel energy projects in 2024

We investigated both direct project investment and indirect project finance enabled by financial institutions as shareholders, providing equity to companies that invest in energy assets. In 2024, total investment in new clean and transition projects reached USD125.6 billion, compared to USD 67.5 billion for new fossil fuel activity. Most finance was to advanced economies.

Asset managers lead on indirect finance

Asset managers accounted for 47% of indirectly enabled energy project investments, and banks 25%. Asset owners provided 17%, pointing to an opportunity to increase their indirect investment in clean energy.

Banks dominate direct finance

Banks accounted for 94% of tracked new direct project finance, totalling USD 164 billion. This includes both project finance and flows to projects via balance sheet finance.

Emerging economies should be targets for clean energy

In 2024, the NZFT tracked USD 26 billion in direct clean and transition energy project finance in EMDEs, 23% of the global total. Of this, 72% originated from advanced-economy institutions, showing potential to shape EMDE energy markets by increasing the share of clean and transition finance.

IMPACT

Increasing clean energy investment is vital to mitigating climate risks

Physical climate risks threaten financial stability. Portfolio loss projections rise sharply under higher warming scenarios, underscoring the need to divest from emission-intensive activities as a matter of fiduciary duty. Risks are most acute for financial institutions with investments in sectors and regions particularly vulnerable to climate change, primarily in developing economies. Targeted investment in resilience and adaptation—alongside effective mitigation efforts—can safeguard asset values, protect communities, and preserve long-term market viability.

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Ambitious targets and robust implementation actions are important drivers of real-economy impact.

TARGETS

Targets have expanded rapidly, but often lack depth

Tracked institutions adopting a climate target grew from 34% by assets managed/owned in 2019 to 82% in 2024, representing over USD 233 trillion. The impact of withdrawals from net-zero coalitions may be reflected in the next NZFT dataset update covering 2025.

Institutions most frequently adopted mitigation targets, but with relatively low quality. Fossil fuel exclusion policies often had weak timelines and incomplete scope. Climate investment targets tended to be of higher quality when adopted.

Aggregate scores for Target indicators

IMPLEMENTATION

Implementation quality has significantly improved

Many institutions have moved beyond symbolic commitments, improving their Implementation since 2019. Yet, comprehensive action remains rare. No institution achieved a Best Practice overall Implementation score, and only 24 reached an Advanced response. Disclosure of climate risk management and internal accountability advanced most, with room to improve policy engagement, investment data disclosure, and working toward net zero without offsets.

Shareholder engagement has improved in breadth, but investor support for climate-related resolutions has declined, especially in the US.

Overall implementation scores

Policy, climate coalitions, and transition plans can help drive progress

NZFT data indicates that stronger country regulations push investors further on climate action, while weaker frameworks leave major gaps. The picture is nuanced, but regulatory support generally correlates with climate performance over investor types and countries.

Membership in industry climate coalitions is strongly associated with financial institutions’ higher climate action and ambition. This is true across Targets, Implementation, and Impact, though gaps remain even among coalition members.

Transition plans are an emerging useful tool for institutions to align governance with climate objectives. They can drive improvements in target-setting and implementation, but currently show limited effects on portfolio alignment and real-world impact.

Countries' relative performance within the NZFT sample across Targets, Implementation, and Impact

Explore our analysis

The NZFT yields data and insights for policymakers, regulators, and coalitions to lay the groundwork—and for investors themselves to increase action—to guide financial system transition efforts. Explore our reports for more insights and information.

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