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Article 2.1(c): The Paris Clause Behind Every Climate Rule Your Regulator Issues
  • Paris Agreement
  • IFRS S2
  • NGFS

Article 2.1(c): The Paris Clause Behind Every Climate Rule Your Regulator Issues

Article 2.1(c) of the Paris Agreement commits countries to make all finance flows consistent with low-emission, climate-resilient development. How it reaches GCC banks and boards.

By Sumit Agarwal
4 min read
Key takeaways
01

Article 2.1(c) is one of the Paris Agreement's three long-term goals: making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.

02

It covers all finance, public and private, not only the climate finance developed countries provide under Article 9. That is why it is the treaty root of climate risk regulation and climate disclosure.

03

In the GCC it reaches banks through central bank rules (binding in the UAE and Oman, IFRS S1 and S2 in Qatar, directives in Kuwait, guidance in Bahrain) and through securities regulators and disclosure standards.

04

For boards, the practical meaning is that climate is treated as a financial risk and an allocation question, not a corporate social responsibility topic.

Introduction

Ask most GCC bank board members where their regulator’s climate rules come from and the answer will be the central bank, the securities regulator or “ESG”. The deeper answer is a single clause in the Paris Agreement, Article 2.1(c), which for years attracted little attention and is now the treaty basis for climate risk regulation and disclosure worldwide.

This article explains what Article 2.1(c) says, how it differs from the climate finance most people associate with Paris, and how it reaches a GCC bank or listed company.

What it says

Article 2.1 sets out the three aims of the Paris Agreement, in the context of sustainable development and efforts to eradicate poverty:

  • (a) Temperature: holding the increase in global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit it to 1.5°C.
  • (b) Adaptation: increasing the ability to adapt to the adverse impacts of climate change and fostering climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production.
  • (c) Finance: making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.

The first two goals describe the physical outcome. The third describes the money needed to get there, and it is not limited to any particular kind of money.

Why “all finance” matters

The Paris Agreement has a separate article on climate finance. Under Article 9, developed countries shall provide financial resources to developing countries for mitigation and adaptation, and report on it every two years. That is a transfer between governments, with a collective goal now set at USD 300 billion a year by 2035.

Article 2.1(c) is different in kind. It does not say who pays whom. It says that finance flows, without qualification, should be consistent with a low-emission, climate-resilient pathway. Legal scholars and regulators read that as all finance: public and private, domestic and international, bank lending, bond markets, insurance and investment.

The consequence is mainstreaming. If every finance flow is meant to be consistent with the Paris pathway, climate stops being a separate “green finance” niche and becomes a property of all financial decisions. The Stern Review (2006) called climate change the greatest and widest-ranging market failure ever seen: emissions are an externality that does not appear on balance sheets. Article 2.1(c) is the commitment to correct that through the financial system.

How it reaches a GCC bank

The Paris Agreement binds states. Article 2.1(c) reaches financial institutions only when the state turns it into rules. In the GCC that happens through three channels.

1. Central bank climate risk rules. The GCC central banks are moving at different speeds. The Central Bank of the UAE’s Climate-related Financial Risk Management Regulation (Circular C 8/2025, issued 14 October 2025) is binding. The Central Bank of Oman’s Circular BM 1208 (October 2024) binds banks on governance, strategy, risk management and annual public climate disclosure. Qatar Central Bank requires IFRS S1 and S2 from all banks and insurers from FY2026. The Central Bank of Kuwait’s 2022 directives bring climate risk into ICAAP. The Central Bank of Bahrain has issued guidance, and SAMA has no climate risk rule in its Rulebook. Our comparison of GCC central banks sets out each position.

2. Disclosure standards. IFRS S2 requires companies to disclose climate-related risks and opportunities, their effect on strategy and financial position, scenario analysis of climate resilience, and climate targets, including how the latest international agreement on climate change has informed them. For banks it also brings financed emissions into view. Where GCC regulators adopt IFRS S1 and S2, Article 2.1(c) becomes a reporting obligation.

3. Sustainable finance frameworks. Taxonomies, green and sustainability-linked lending frameworks and green bond rules define which flows count as aligned. They are the classification tools that make “consistent with a pathway” measurable.

What it means for boards

For a GCC board, Article 2.1(c) changes the frame of the climate conversation in three ways.

  • Climate is a financial risk. Transition and physical risks affect credit quality, collateral values and market risk, so they belong in the risk appetite, ICAAP and stress testing, not only in the sustainability report. See our guide to NGFS climate stress testing for GCC banks.
  • Allocation is a strategic question. A balance sheet that keeps financing high-carbon activity without a transition path is accumulating policy and market risk. A transition plan is how a bank shows the direction of its own flows.
  • National policy sets the path. What “consistent with a pathway” means in practice depends on each country’s NDC. See what your country’s NDC means for your bank’s climate risk.

Sources: Paris Agreement (2015), Articles 2 and 9; COP29 decision on the new collective quantified goal on climate finance (2024); IFRS S2; the GCC central bank instruments named, as set out in our comparison updated 20 October 2026.

Frequently asked questions

What does Article 2.1(c) of the Paris Agreement say?

Article 2.1 sets out the Agreement's aims. Paragraph (c) is: making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. It sits alongside (a), the temperature goal of well below 2°C and pursuing 1.5°C, and (b), increasing the ability to adapt.

How is Article 2.1(c) different from Article 9?

Article 9 is about climate finance: developed countries shall provide financial resources to developing countries for mitigation and adaptation, and must report on it. Article 2.1(c) is wider: it is about the direction of all finance flows, public and private, domestic and international. Article 9 is a transfer; Article 2.1(c) is an alignment goal for the whole financial system.

Is Article 2.1(c) binding on banks?

No. The Paris Agreement binds states, not banks. Article 2.1(c) reaches banks when governments, central banks and securities regulators turn it into rules: climate risk management requirements, disclosure standards such as IFRS S1 and S2, sustainable finance taxonomies and frameworks.

Which GCC central banks have climate risk rules?

The Central Bank of the UAE (Circular C 8/2025, binding risk management) and the Central Bank of Oman (Circular BM 1208, binding risk management and annual disclosure). Qatar Central Bank requires IFRS S1 and S2 disclosure from banks and insurers from FY2026. The Central Bank of Kuwait issued directives in 2022 that bring climate risk into ICAAP. The Central Bank of Bahrain has issued guidance. SAMA has no climate risk rule in its Rulebook.