Assessing the climate consistency of finance
Taking stock of methodologies and their links to climate mitigation policy objectives
This paper analyses existing methodologies developed by commercial services providers,
research institutes or civil society organisations for investors and financial institutions,
to assess the alignment of their assets and portfolios with the Paris Agreement temperature
goal. The analysis is based on four main analytical dimensions: coverage of financial
asset classes, choice of greenhouse gas (GHG) performance metrics, selection of climate
change mitigation scenarios, and approach for aggregating alignment assessment for
a given asset class and at portfolio level. Within these dimensions, the analysis
highlights that a range of different and complex methodological choices, as well as
current scope and data limitations, impact the environmental integrity and policy
relevance of alignment or misalignment results. The paper provides suggestions for
improved and more comprehensive financial sector alignment assessment. These include
the development of different complementary methodologies to cover a broader range
of financial asset classes than the current main focus on listed corporate equity,
the development of more tailored mitigation scenarios by climate policy and science
communities, better communication of uncertainties by all stakeholders, and the need
for a series of indicators to assess progress and impacts that include but are not
limited to GHG based alignment assessments.
Available from October 04, 2022
In series:OECD Environment Working Papersview more titles