Why? It provides information on and helps to monitor the volume or relative share of activities contributing to the mitigation objective of the Paris Agreement. This tracking can also be used to report on the contribution to international climate finance goals, particularly among development banks.
How? Institutions often use taxonomies or positive lists of activities that reduce GHG emissions to classify projects or assets held in their portfolios. This is the case of the group of multilateral development banks (MDBs) and the International Development Finance Club (IDFC), which developed Common Principles for Climate Mitigation Finance Tracking. Other regional or national taxonomies such as the EU taxonomy help to classify companies held in portfolios, and in turn measure the volume of investments contributing to the mitigation objective.