Developing criteria to align investments with 2°C compatible pathways
- The German government, through the German Federal Environment Agency, commissioned a consortium consisting of NewClimate Institute, Germanwatch, and the 2° Investing Initiative to explore criteria to measure the alignment of investment and financing with the 2°C limit. The project focuses in particular on development finance institutions.
- Financial institutions and climate objectives are connected both from a financial risk and climate change impact perspective. 2° investing criteria can inform this link and increase financial sector transparency and accountability.
- Current investment and financing flows are misaligned with the 2°C limit. Financial institutions can play a prominent role in contributing to aligning these flows. A particular focus of this project is on the role of national and international development finance institutions.
- The majority of development finance institutions have started integrating climate-related criteria into their financing decision. The existing landscape of criteria however does not ensure an alignment of these financing decisions with the 2°C limit.
- Using the long-term perspective provided in 2°C scenarios as a starting point, 2° investing criteria can be developed on the basis of 2°C decarbonisation, technology, and investment roadmaps. Further research and consultations with investment practitioners are needed to define processes and criteria that ensure 2°C compatible investment. Such a process would benefit from broad support by G7 and other governments and participation of a broad set of public financial institutions.
- Further research and consultations with investment practitioners are needed to define processes and criteria that ensure 2°C compatible investment. Such a process would benefit from broad support by G7 and other governments and participation of a broad set of public financial institutions.
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Senior Advisor – Climate Finance and Investments
