Law and the International Financial Architecture: pathways and pivot points for achieving Paris objectives

In an investment landscape blighted by systemic misalignment and trust deficits, this chapter proposes a new conceptualization of the International Financial Architecture (being the governance arrangements that safeguard the stability and function of global monetary and financial systems) that extends beyond multilateral development banks to include private finance institutions as key allocators of capital around the world and also multi-scalar law and regulation that is responsible for steering finance alignments. Our analysis begins with legal examination of the 'finance imperative' in Article 2.1(c) of the Paris Agreement, and its structural importance in relation to Article 9 and the New Collective Quantified Goal on climate finance, to show that Article 2.1(c) is a facilitative modality for transformative legal obligation that has potential to mainstream sustainable finance. We further argue that bridging financial gaps and embarking upon what we term as a 'trust transition' (in addition to a just transition) requires a coherent framework of national and regional legal, regulatory, and fiscal measures that all point in the same direction to realign finance flows. We posit two big picture approaches to action these imperatives, being a reexamination and renewal of the International Financial Architecture and, secondly, thoughtful law and regulation that not only aligns economic activity but also positions accountability and transparency as central to the net zero transition.