In 2016, the Paris Agreement defined the global objective of making financial flows consistent with the commitment to limit global warming to well below 2°C (Art. 2.1c). However, pilot studies suggest that the behaviour of institutional investors around the globe will lead to global warming of well beyond 4°C, resulting in major environmental upheavals.

The Paris Agreement Capital Transition Assessment (PACTA) project helps address this gap, providing policymakers and financial supervisors with the tools they need to align financial flows with the Paris Agreement’s goals.

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A key challenge to assessing long-term and climate-related risks involves what Mark Carney, the Governor of the Bank of England, called “the tragedy of the horizon”. Long-term liabilities and assets face a ‘valley of death’ in terms of the time horizons underlying capital allocation decisions in financial markets. As a response, we initiated the ‘Tragedy of the Horizon’ research program to quantify time horizons in the investment chain and elevate long-term risk assessments in financial markets.

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Helping non-state actors set and implement climate change action strategies

Currently, non-state actors (NSAs), particularly companies and financial institutions, have limited ability to assess how their energy- and climate-related commitments will contribute to the goals of the Paris Agreement, and how to set targets that are aligned with these goals. For instance, companies frequently lack visibility on climate strategies and regulations at the sectoral level, which reduces their willingness to invest in low-carbon technologies. Meanwhile, institutional investors lack standard metrics to select companies whose technological mix/emission pathways are best aligned with a 2°C target.

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According to the OECD, meeting the 2°C scenario will require $6.9 trillion annual investments in infrastructure until 2030, versus $6.3 trillion annual investments in a business-as-usual scenario. These investments require precise alignment among governments, corporates, and investors.

However, several important factors hinder efforts to channel investments towards low carbon pathways. For instance, governments frequently lack the referential frameworks and tools to develop national climate strategies (national determined contributions, or NDCs) that are consistent with the 2°C scenario. Likewise, corporates often lack visibility on public climate strategy at national sectoral level, which weighs on their confidence in investing in low carbon […]

One of the cornerstones of the Task Force on Climate-Related Financial Disclosures (TCFD), as well as governmental regulations such as Article 173 of France’s Law on Energy Transition for Green Growth, center on the need for financial institutions to disclose climate-related risks. However, many financial institutions continue to apply these recommendations haphazardly, with a wide range in terms of the quality and amount of information provided.

Building on their inaugural edition in 2016 and recent international developments in the field of climate-related reporting, the International Awards for Climate-Related Financial Disclosures offer the opportunity for financial institutions to showcase leading practices, […]

While sustainable finance is a growing field, standards for measuring, reporting, and other frameworks are still in their infancy. Without agreed-upon standards, investing and financing activities related to climate change run the risk of “green-washing,” leaving investors and regulators with little information about the impact of their activities.

ISO (International Standards Organization) Standard 14097 was proposed by the French national standardization body, AFNOR, and approved by ballot in January 2017. The conveners are Stanislas Dupré, CEO of 2°ii, and Massamba Thoiye, Manager of the Sustainable Development Mechanism Program of the UN Framework Convention on Climate Change (UNFCCC). Its objective is […]