Since COP21, climate target-setting by investors and banks has evolved into an increasingly popular concept.

Impact program

However, there has been limited focus on understanding how these kinds of initiatives will contribute to impact – that is, greenhouse gas emissions reductions – in the real economy. The Impact Program’s objective is to address this issue, by enabling financial institutions (FIs) to devise climate strategies designed to contribute to the Paris Agreement goals. 2DII is taking a two-pronged approach to achieving this objective.

Development of new impact tools

First, 2DII is developing a Climate Impact Management System to guide FIs in setting up science-based climate contribution strategies. A preliminary version of this report is currently available for consultation here. Alongside these efforts, we are building new tools to help financial institutions apply the Climate Impact Management System. These tools will assist FIs in not only identifying companies that are critical from a climate perspective and should therefore be targeted, but also in understanding what actions can be undertaken to influence these investees toward sustainability. We are focusing on three main tools:

  • A Climate Action Guide, an interactive guide summarizing currently available knowledge about actions that financial institutions can take to contribute to emissions reductions in the real world. This enables them to explore all actions applicable to their type of institution and asset of interest and maps each action to “levels of evidence”, reflecting proof of effectiveness associated with the action in the academic literature. A variety of additional information is also provided for each action, such as relevant initiatives or articles, names of professionals that can help in implementing the action, etc. The Guide is available here.
  • A Climate Action Planning Template to systematically record climate actions and contribute to building scientific evidence of their impact on emissions reductions in the real economy. The objective here is to upgrade the state of evidence regarding the real world impact of climate actions, with the ultimate goal of being able to identify causality between a given financial institution’s action and the related changes in the real economy.
  • A Climate Action Tracker, which will allow financial institutions to submit climate actions, to track their implementation, and to evaluate their long-term impact on the real economy.

Collaboration with financial industry players

In addition to developing new impact-related tools, 2DII is also engaging with key players in the financial industry. In March 2020, 2DII launched the Evidence for Impact Working Group, in collaboration with 30 leading financial institutions, 10 NGOs and academic institutions, and with funding from the European Commission and the Swiss government, among others. The Working Group is closely involved in the development and testing of the deliverables listed above.

As well as the Evidence for Impact Working Group, 2DII is working with a wide range of financial industry stakeholders to refine the above-mentioned frameworks and tools.

Since 2018, for instance, 2DII has worked closely with the “Katowice Pledge Banks” (BBVA, BNP Paribas, ING, Société Générale, and Standard Chartered) to develop new target-setting frameworks and action toolkits for the banking industry. Notably, 2DII collaborated with the Katowice Banks and 12 others to road test PACTA for Banks, a climate scenario analysis toolkit that measures portfolio alignment with climate benchmarks.

2DII is also working on these issues with a network of French financial institutions established as part of Finance ClimAct, a five-year project to help implement the EU Sustainable Finance Action Plan. Operationally, 2DII is working with the French Ecological Transition Agency (ADEME) to support French financial institutions in adopting climate targets and decarbonization plans in line with government guidelines.

About our funders: This work has received funding from, among others, the European Climate Foundation and the KR Foundation. It is also part of the International Climate Initiative (IKI). The Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) supports this initiative on the basis of a decision adopted by the German Bundestag. It is additionally supported by Finance ClimAct, which has received funding from the European Union’s Life IP programme under grant agreement No LIFE18/IPC/FR/000010 A.F.F.A.P.

This work reflects 2DII’s view only, and the funders and other Finance ClimAct consortium members are not responsible for any use that may be made of the information it contains.


Related resources