NCI, GW, 2°II (2015): Developing Criteria to Align Investments With 2°C Compatible Pathways

NCI, GW, 2°II (2015): Developing Criteria to Align Investments With 2°C Compatible Pathways

This report summarises the main lines of thinking on the need, development and use of 2°C-compatible investment criteria, as well as the relevance of the investment community for the achievement of climate policy goals. The point of departure of this report is the current landscape of climate-related metrics, designed to measure climate benefits of an investment decisions relative to no investment. A measurement of climate benefits however does not automatically inform on whether investments are compatible with a 2°C economy in terms of the scale of their impact. The ability for 2° investing criteria to act as a benchmark informing on this compatibility is their defining feature, both from the perspective of financial risk and climate change.

A growing number of financial institutions account and report climate-related criteria. Public financial institutions are leading in this respect, but some private financial institutions have also started integrating these criteria into investment decisions. This resport looks at existing criteria and approaches used by public banks to guide investment decisions today and assesses their appropriateness with respect to the 2°C objective. This is followed by an analysis on how 2°C model scenarios can be used as a basis to develop 2°C investment criteria and to understand not only whether an investment is climate friendly, but also to which extent it may be compatible with the agreed 2°C limit. Lastly, the report provides some considerations on the particular role that public financial institutions could play to drive and steer markets, as well as the role of governments to support the 2°C compatible investment agenda. The concluding outlook will highlight key questions to be addressed by this and future research which are intended to stimulate further debate and engagement on this important topic.