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We align financial markets with climate goals

The 2° Investing Initiative (2DII) is an independent, non-profit think tank working to align financial markets and regulations with the Paris Agreement goals. Globally focused with offices in Paris, New York, Berlin, London, and Brussels, 2DII coordinates some of the world’s largest research projects on climate metrics in financial markets. 2DII is also active in Brazil, Chile, Colombia, Malaysia, Mexico, Nigeria, Peru, and the Philippines, among others, notably through the work of its Emerging Markets Program.

Research programs

PACTA / Climate Scenario Analysis

One of the long-term objectives of the Paris Agreement is making finance consistent with climate goals. PACTA aims to help financial institutions, supervisors, and governments contribute to this objective by providing them with insights into the extent to which their portfolios are aligned – or misaligned – with the Paris Agreement goals. This, in turn, helps them figure out how to steer their investment and lending portfolios towards a ‘greener’ pathway. Already, more than 1,500 financial institutions worldwide have used PACTA, in addition to major supervisors and central banks (EIOPA, California Department of Insurance, Bank of England, and more).

Retail Investing & Consumer Protection

2DII’s Retail Investing Research Program aims to empower consumers to achieve their sustainable investment objectives and to give financial advisors the tools they need to properly advise them. To accomplish this, in 2019 2DII launched a wide-ranging program that spans market research, policy analysis, legal research, and consumer surveys. Our research also aims to support the European Commission’s new series of reforms on this topic, such as requirements for financial advisors to take clients’ non-financial investment objectives into account.

Long-term Risk Management & Supervision

This research program aims to integrate the management of long-term risks, particularly those related to climate change, into financial markets and supervisory practices. In doing so, the program combines a number of 2DII’s current and past research streams, including the Tragedy of the Horizons research project (2015-2017), 2DII’s work on climate and sustainability stress testing, and its broader research initiatives on integrating long-term risk into private sector and government practice.

Impact

Since COP21, climate target-setting by investors and banks has evolved into an increasingly popular concept. However, the lack of standardized frameworks and best practices in this field is emerging as a major obstacle to the alignment of global financial flows with the Paris Agreement goals. In order to address this issue, 2° Investing Initiative is working closely with financial institutions, policymakers, and other stakeholders across the sustainable finance sector in order to develop improved methodologies on impact and target-setting.

Emerging Markets

Countries in Latin America and many other emerging markets rank among the most vulnerable to climate change, as they are highly exposed to both physical risks and transition risks associated with the shift to a low-carbon economy. However, efforts to understand and respond to these risks are still in their early stages. To help address this issue, since 2018, 2DII has been expanding its work in emerging markets with an initial focus on Latin America. Our activities in the region aim to help investors, banks, supervisory authorities, regulators, and governments integrate climate change considerations into their activities, with a special focus on portfolio analysis. Thus far, 2DII has worked with financial institutions, supervisors, and regulators in Brazil, Chile, Colombia, Malaysia, Mexico, Nigeria, Peru, and the Philippines, among others.

New Developments

This program focuses on identifying and incubating new research areas, in order to maintain 2° Investing Initiative’s focus on cutting-edge developments in sustainable finance. It builds on 2DII’s numerous research innovations, including the development of the PACTA climate scenario analysis methodology, the expansion of the methodology to the banking sector, and the incubation of Asset Resolution, a data solutions spinoff. The program will help ensure that all of 2DII’s work is based on the most recent scientific advances in the field.

Our values

Non-commercial & committed to the public good
We have no commercial contracts and provide all of our research open source and IP rights-free. This policy minimizes financial conflicts of interest and guarantees the public good-driven nature of our work.

Independent and interest-neutral
Our governance and our funding structure is designed to be diversified and multi-stakeholder. This helps ensure that our research does not represent a particular interest group, but rather our best understanding of the truth.

Science- and evidence-based
We continuously aim to expand and improve the evidence base for decision-making in sustainable finance.

Our theory

One of the three long-term goals of the Paris Agreement is “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development” (Article 2.1c). At the 2° Investing Initiative, we work to reform investment frameworks and mobilize the financial sector to reallocate capital in line with below-2°C climate goals.

Nearly 10 years after our founding in 2012 with the mission to “Promote the integration of climate constraints in financial institutions’ investment strategies and financial regulation”, many of the core concepts we devised have become integrated into market practices, as well as being placed on the regulatory agenda in the EU and beyond. For instance:

  • 2DII helped draft the preliminary version of France’s groundbreaking article 173, the first climate-related financial regulation in Europe, in addition to the first report commissioned by the European Commission on sustainable finance and HLEG recommendations on disclosure, supervisors and retail investors.
  • With the launch of the Paris Agreement Capital Transition Assessment (PACTA) methodology, 2DII coined the concept of aligning portfolios with climate goals. This concept has been taken up by more than 1,500 investors and banks around the globe, in addition to being embedded in EU regulations and the Task Force on Climate-Related Financial Disclosures (TCFD).
  • 2DII introduced climate scenario analysis and stress-testing into regulatory practices, through high-level collaborations with governments and supervisors including the UK, Japan, Switzerland, the Netherlands, the European Insurance & Occupational Pensions Authority (EIOPA), California Department of Insurance, and more.

Annual reports