A Strategic Framework for Financial Institutions for Paris Alignment

More and more financial institutions are committing to aligning their portfolio with the Paris Agreement and setting net zero emissions targets. This growing momentum is matched by the fast-rising number of initiatives, projects, methods, and tools to enable financial institutions to achieve Paris alignment.

In this growing and complex landscape of climate finance activities, financial institutions need a standardized language to define common terms and need more clarity on how these activities relate to each other. A new report from the Partnership for Carbon Accounting Financials (PCAF), written by Guidehouse, seeks to clarify clarifies this landscape.

The report, Strategic Framework for Paris Alignment, provides an overview of 19 global climate initiatives for financial institutions, which are classified according to the value they bring to banks and investors in each of the stages of the Paris alignment process. The overview enables financial institutions to navigate the landscape of initiatives and to identify which best suit their needs. The report also provides an up-to-date summary of developments in the sustainable finance globally, from the convergence of frameworks and standards to policies and regulation.

According to the report, measuring financed emissions is crucial in providing an understanding of climate-related transition risks to a portfolio and helps financial institutions to set an emissions baseline, develop science-based targets, act to reduce their portfolio climate impact, and disclose progress.

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