The analysis starts with a review of scientific scenarios to understand what the temperature goal means for different investment areas.
Based on the analysis of Paris-compatible pathways and other relevant scientific literature, authors start by defining three categories of investments: “Paris-aligned”, misaligned” and “conditional”.
“Paris-aligned means investments in this area fully support the achievement of the Paris Agreement’s temperature goal. Misaligned means they undermine this goal. For investment areas and technologies classified as “conditional”, whether they can be considered Paris-aligned depends on the exact circumstances and characteristics of a project. In order to assess investments in the “conditional” category, more granular decision-making tools are needed. The classification should become a recurrent exercise, which is updated at least every five years as new knowledge becomes available. Where possible, it should also be forward-looking, i.e. indicate from today the point from which an investment area might move from the “conditional” to the “misaligned” category.”
Building on those, the research then suggests various tools and approaches to align portfolios with the temperature goals, based on existing tools and activities at the Multilateral Development Banks.