The paper highlights the need for net zero targets and performance metrics to explicitly distinguish ‘alignment’ from impact generation. Specifically, it highlights three types of measurement approaches designed to better distinguish real world impact from virtual emissions reductions as a result of portfolio reallocation. These are:
- Rebaselining of emissions / alignment disclosures to distinguish ‘virtual’ changes from real world outcomes;
- Disclosure of primary vs. secondary market transactions to better understand the extent to which direct financing is provided;
- Full disclosures of the universe of climate actions and impact case studies to better understand actions taken by the financial institution to realize impact outcomes and to inform academic research on the topic.