OECD Environment Working Papers

This series is designed to make available to a wider readership selected studies on environmental issues prepared for use within the OECD. Authorship is usually collective, but principal authors are named. The papers are generally available only in their original language English or French with a summary in the other if available.


Assessing the climate consistency of finance

Taking stock of methodologies and their links to climate mitigation policy objectives

This paper analyses existing methodologies developed by commercial services providers, research institutes or civil society organisations for investors and financial institutions, to assess the alignment of their assets and portfolios with the Paris Agreement temperature goal. The analysis is based on four main analytical dimensions: coverage of financial asset classes, choice of greenhouse gas (GHG) performance metrics, selection of climate change mitigation scenarios, and approach for aggregating alignment assessment for a given asset class and at portfolio level. Within these dimensions, the analysis highlights that a range of different and complex methodological choices, as well as current scope and data limitations, impact the environmental integrity and policy relevance of alignment or misalignment results. The paper provides suggestions for improved and more comprehensive financial sector alignment assessment. These include the development of different complementary methodologies to cover a broader range of financial asset classes than the current main focus on listed corporate equity, the development of more tailored mitigation scenarios by climate policy and science communities, better communication of uncertainties by all stakeholders, and the need for a series of indicators to assess progress and impacts that include but are not limited to GHG based alignment assessments.


Keywords: Investment, finance, greenhouse gas emissions, climate alignment assessment methodologies, climate change mitigation scenarios
JEL: Q56: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth; G24: Financial Economics / Financial Institutions and Services / Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies; Q54: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Climate; Natural Disasters and Their Management; Global Warming; G23: Financial Economics / Financial Institutions and Services / Non-bank Financial Institutions; Financial Instruments; Institutional Investors
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