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Net Zero Portfolio Targets for Development Finance Institutions

This Oxford University report developed as part of the Climate Compatible Growth (CCG) programme discusses both the current challenges and the potential solutions related to net zero portfolio targets within development finance institutions.

Key points

Some of the key findings found within the report are as follows:

  • Net zero portfolio targets provide a transparent and credible direction of travel for DFIs committed to climate action.
  • The practical challenges of reducing carbon in the portfolio are real but not insurmountable.
  • This think-piece puts forward concrete proposals to address five salient DFI concerns about net zero investment portfolios.
    • To select an appropriate emissions pathways by ensuring context specificity and adopting a deliberate strategic response to the net zero pathway.
    • To deal with inertia and lumpiness in the portfolio using “when” and “where” flexibility to reduce the impact of slow turnover of large project porfiolios and to adopt transparent safeguards against carbon avoidance structures.
    • To incentivise transition projects through the use of future emission accounting and/or a system of “transition credits”
    • To manage trade-offs with development objectives by resisting the special treatment for high-development projects and by using internal carbon prices.
    • To account for emissions after  project end through consistent post-project monitoring.