Barely anyone has outlined emissions cuts. Financiers see that as an opportunity

Countries first submitted NDCs after the Paris Agreement was signed in 2015, and the voluntary targets were meant to be updated every five years, charting countries’ progress towards their goals but also — in theory — allowing for increased ambition as national capitals deepened their understanding of the energy transition and climate change’s impacts.

But the most recent deadline of Feb. 10, 2025 was largely missed: Only 13 countries submitted their NDCs. (Despite US President Donald Trump’s stated opposition to the Paris Agreement, his country was among them, with the Biden administration handing the revised targets in before it left office.) Even now, a month on, that figure stands at just 18, accounting for about 20% of global emissions, according to ClimateWatch.

So-called “investable NDCs” are even fewer: No country, for example, comes close to meeting criteria set by the London School of Economics’ Transition Pathway Initiative for such a plan. Aviva is part of a group of about 25 investors seeking to press governments for more granular transition outlooks, with a particular focus on climate change’s impacts on government bond investments, global economies as well as companies, and broader systemic risks.

In particular, bond investors want predictable and stable timelines for fossil-fuel phaseouts and government investments in industries, details on how governments will fund their transition plans, and what countries plan to do to attract companies to invest in the transition, Rahul Ghosh, the global head of sustainable finance at the credit ratings agency Moody’s, said in an interview.

Even to those who are aware of NDCs — already a relatively small group — the targets can seem ephemeral: Sure, the United Kingdom wants to cut emissions by 81% by 2035 compared to 1990 levels, but how does that actually affect the economy, businesses, and consumers? The target is a decade away and the figure can itself feel like a distant concept.

It turns out, however, that the finance industry does care. More and more.

Bankers, investors, and analysts have all told me that the plans factor into their calculations at varying levels when it comes to making lending decisions. And though climate and the NDCs are by no means the only factor — indeed, they are small ones, for now — their importance will grow with time, and as countries supplement them with more concrete action plans such as those that outline phaseouts of fossil fuels or adjacent industries like internal-combustion engine vehicles, taxes or penalties on polluting practices, and the tightening of climate standards on particular sectors.

From the perspective of lenders, “investable NDCs” inform how risky certain loans or bonds can be: Two senior European bankers told me the documents point to the future trajectory of a country’s economy, what it intends to spend finite resources on, and which sectors are likely to boom — and at risk of bust. That can then drive decisions on whether companies seeking loans have a strategy that aligns with the plans their home government has put in place: If they don’t, that can be a red flag.

For investors, particularly those buying government bonds, they point to a country’s likely future spending plans and, thus, its borrowing requirements. “If countries were to be serious about the transition — and this is big if at the moment — they ought to be costing the necessary action to implement that transition,” said Carmen Nuzzo, an economist and the head of the LSE’s TPI, which last week hosted a panel on the issue of investable NDCs. Those actions, she continued, will “inevitably have fiscal implications, whether through higher taxes or lower spending or deficit spending.”

Ultimately, as Dillon put it, “more credible NDCs can help reduce risk,” offering countries a chance “to showcase that they’re managing economy-wide risks, and that can make them more attractive to investors.” That, potentially, could reduce borrowing costs or prove a key differentiator for countries — particularly poorer ones — that find it more difficult than Western nations to raise money on international bond markets.

One London-based banker I spoke to about the issue of investable NDCs dismissed their usefulness out of hand. Because some banks’ own risk profiles theoretically mandate them to reach the Paris Agreement’s target of limiting warming to 1.5 degrees Celsius over pre-industrial levels, it would be illogical to rely on documents that overall do not meet that goal, the banker said. Moreover, investment banks have access to far more sophisticated, relevant, and timely data.

There is also not yet a strong link between greater transparency in climate transition planning and lowered borrowing costs. “Data and disclosure of its own right is not necessarily credit-positive,” Ghosh said. He added, however, that better data was correlated to well-managed governance, which certainly can improve a country’s credit rating, and higher-quality climate change plans were more likely to draw private-sector investment that would pay off over years if not decades.