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Paris-alignment methodologies for banks: reality or illusion?

This report aims to establish best practice recommendations for Paris-alignment of bank portfolios, based on a review of two major open-source frameworks and one methodology developed in-house: The Science Based Targets initiative (SBTi), The Paris Agreement Capital Transition Assessment (PACTA), and Barclays’ BlueTrack. Recommendations are intended for banks or investors engaging with banks on their climate strategies.

Key points

Key conclusions and recommendations of the report include:

  • The inherent uncertainty associated with Paris-alignment methodologies calls for a precautionary approach to portfolio alignment.
  • None of the methodologies covered in this report currently include or recommend including a climate scenario that is compatible with a reliable 1.5°C outcome.
  • Robust sectoral policies can minimise any offsetting risks
  • Scope of financing activities remains incomplete and underestimates transition risks
  • The three methodologies vary greatly in scope and take different approaches to alignment