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Measuring Paris Agreement alignment and financial risk in financial markets

As of: December 2019

Objective and activities

The project responds to the Paris Agreement objective of aligning financial flows with global climate objectives by developing and disseminating 2°C assessment frameworks to at least 100 financial institutions with investments in partner countries and developing an open source framework that can be adopted by other actors. The project will  allow policymakers to measure the 2°C alignment of their capital markets and have access to a reporting framework for domestic market investors. In partnership with investment consultancy Mercer, it complements this 2°C assessment framework by further developing the Mercer climate risk assessment tool. The tool and dissemination activities developed in the course of the project will create the infrastructure to allow investors to measure 2°C alignment for free in partner countries and access climate risk assessments at a low cost, with at least 40 partner country risk assessments offered for free in the project and 100 2°C tests.

State of implementation/results

2ii has developed a series of tools for both investors and banks in emerging markets and/or with financial exposure to emerging markets. Investors: 2ii has launched a website that provides investors with two tools that can be used in their climate-related investment processes. The first tool is a scenario analysis tool, which allows investors to measure corporate bonds and listed equity portfolios’ alignment with different scenarios, including a scenario compatible with the Paris Agreement goals. The second tool, is a climate stress-testing tool, which allows investors to quantify the expected changes in the value of investment portfolios under different climate scenarios. The tools are available at transititionmonitor.org. Since the tools were launched, nearly 2,000 individuals from more than 1,000 institutions have used them to conduct over 6,700 tests, with an average of 500 portfolio tests performed per month. Banks: 2ii is now working with an initial pilot group of 17 international banks that will be road-testing a scenario analysis tool, developed by 2ii over the course of the year. The 17 banks count for 20% of the banking sector assets. 2ii is participating in the upcoming months at the following key workshops/events:

  • October 11th – 12th. Asia-Pacific Economic Cooperation ESG seminar,, Santiago de Chile, Chile.Santiago de Chile, Chile
  • October 14th – 15th. United Nation Environmental Programme Regional Roundtable,, Sao Paulo, Brazil.
  • November 19th. Principles for Responsible Investment Climate Forum,. Santiago de Chile, Chile.

Project data

Implementing organisation:
2° Investing Initiative

BMU grant:
€ 2,806,403

Duration:
07/2018 till 06/2021

Website(s):