Why? It helps to identify activities and investments that will have to transition or might become ‘stranded” assets in the future.
How? Taxonomies and positive lists can help identify companies, assets and activities that are currently unaligned; have a possibility to transition and become aligned; or pose a risk of “significant harm” vis-à-vis climate goals and have a strong risk of becoming stranded assets. Methodologies assessing a portfolio alignment with low-carbon trajectory can identify assets of a portfolio that are not aligned or compatible with a chosen transition scenario. Further methodological developments are however underway to improve these approaches.