Why? It helps financial institutions to monitor the alignment of their activities today and understand how they may need to evolve in the future to be consistent and contribute to the goals of the Paris Agreement – including the mitigation goal, the adaptation goal, and the goal of making finance flows consistent with a low-GHG climate-resilient development pathway.
How? A range of methodologies are currently being developed to assess alignment with climate goals. At the portfolio level, tools exist to help institutions measure the alignment of their portfolios with a given temperature trajectory. At the activity or project level, screening processes have been developed relying on taxonomies and decision trees to assess consistency with the three climate goals. At the entity level, a few financial institutions have started to assess their counterparts’ consistency or preparedness for the transition.