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.