As COP25 kicks off, the 2° Investing Initiative and Beyond Ratings are delighted to announce the official launch of the Climate Tech Compass, which helps governments, corporates, and financial institutions align their investments and policies with the Paris Agreement goals.
About the Climate Tech Compass
The Compass provides a roadmap of investments, energy capacity, and emissions – sector, technology, and country – in order to achieve the 2°C target.
The methodology recognizes that each sector has a specific transition pathway, or technology roadmap, for it to contribute to the Paris Agreement goals. It covers high-emission sectors where technological change and greenhouse gas reductions will be most critical (automotive, aviation, shipping, power generation, cement, steel, agriculture, real estate).
Operationally, the platform combines 2DII’s high-resolution database of physical assets with Beyond Ratings’ Climate Liabilities Assessment Integrated Methodology (CLAIM) in a new, innovative methodology.
Why it matters
Thanks to the Climate Tech Compass, for the first time investors can critically examine where they should direct their financing, in addition to assessing the risk of stranded assets. The Compass also helps governments design their Nationally Determined Contributions (NDCs) to the Paris Agreement, efforts by each country to reduce national emissions and adapt to the impacts of climate change.
Simon Messenger, Director at 2° Investing Initiative, said: “We are delighted to work with Beyond Ratings to incubate the Climate Tech Compass, an innovative tool that enables investors, corporates, and governments to map their way towards a low-carbon world. It fills a critical gap in the market, helping users determine the technology roadmap and investments needed to achieve the 2°C goal.”
Sylvain Chateau, co-founder of Beyond Ratings, said, “We are proud to leverage our innovative CLAIM methodology to contribute to the Climate Tech Compass, which will play a critical role in channeling investment towards the technologies that are most needed in the key sectors to achieve the Paris Agreement goals. With the IEA’s latest report highlighting that time is running out to shift towards a low carbon world, the Compass comes at a critical moment.”
More on the Climate Tech Compass & context
According to the World Energy Outlook released by the International Energy Agency this month, a massive reallocation of investment towards energy efficiency and renewables will be required in order to meet the Scenario Development Scenario.
These investments will require precise alignment among and mobilization by governments, corporates, and investors, because governments set the policy frameworks to support investment in climate-friendly technologies; corporates invest in developing these technologies; and investors finance corporate equity/bonds, sovereign bonds, and infrastructure projects.
However, several important factors hinder efforts to channel investments towards low-carbon technologies. Notably, governments frequently lack the frameworks and tools to develop NDCs that are consistent with the 2°C scenario; corporates often have low visibility on public climate strategy at the country or sector-level, which weighs on their conﬁdence in investing in low carbon technologies; and institutional investors lack key recognized metrics to select companies whose technological mix and emission pathway are best aligned with a 2°C target.
The Climate Tech Compass responds to these critical market gaps, helping these actors work together and mobilize to help achieve the Paris Agreement objectives.
The Compass has been developed with support from EIT Climate-KIC, the EU’s main climate innovation initiative.