Why? The Paris Agreement set the objective of “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”. Echoing this international objective, financial institutions are increasingly and voluntarily setting targets to assess and improve the consistency of their activities with climate objectives. Some jurisdictions are establishing reporting requirements on the level of alignment of institutions with climate objectives.
How? These targets vary depending on the focus of the alignment commitment and the underlying approach and methodologies adopted to assess consistency with climate objectives. Some institutions have adopted an approach aiming to ensure that each operation is consistent with a low-GHG and climate-resilient trajectory. Other are adopting a portfolio-level perspective, comparing the climate performance of entire portfolios with a low-GHG and climate-resilient trajectory. This is an area where further technical development is underway, particularly in terms of adaptation and resilience.