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Introduction to Commitments and Measurement Methods for Private Financial Sector Portfolio Alignment with the Paris Agreement

Recent analysis conducted under the Helsinki Principle 5 Workstream of the Coalition of Finance Ministers for Climate Action looks at commitments and methods used by the private financial sector to align with the Paris Agreement goals and explores how Ministries of Finance can support these commitments.
In this summary, Jochem Wissenburg from the Ministry of Finance of the Netherlands, Florencia Baldi of the FC4S Network, and Emma Dalhuijsen and Samantha Power of the World Bank look at some of the findings and suggest some potential actions for government actors.

Key points

In developing the Paris alignment process, several issues need to be taken into consideration:
• Results of alignment methodologies need to be made more comparable and financial institutions need to be more accountable. Currently the figures released by different institutions are not easily compared, since data sources and methodologies may differ. Even for institutions that use similar tools or methods this might be challenging.
• The reliability and comparability of climate data internationally needs to be improved, as the FirstRand case confirms.
• The alignment of portfolios is no guarantee for real world impact. An important feature and test of alignment metrics will be how they support a whole economy transition that promotes engagement, and not only divestment.
• An effective Paris alignment approach considers different sectors and asset classes. A sector-based approach considers the fact that each sector has its own transition pathway or technology roadmap for alignment with the Paris goals. Different methods and metrics may thus be suitable for different sectors and asset classes.