Some of the heat waves and wildfires experienced in Europe and around the world in the summer of 2019 are symptoms of a climate that is already changing. These events can lead to losses for banks and other financial institutions, which must therefore include climate change in their decisions. Regulators are also pushing in this direction. In addition, alignment with Paris should take into account national contexts and support common pathways or “visions” of how long-term climate goals could be achieved at national and international levels. In June 2019, the focus will be on the heat wave affecting France and part of Europe. However, we should be less and less surprised by these types of weather events, which are becoming more and more frequent with climate change. To see this, visit the ClimatHD portal put online by Météo France to broadcast the main climate projections in France. The IDFC, in collaboration with the European Climate Foundation, commissioned an independent study from two major think tanks: I4CE and CPI on the Parisian orientation for the financial world, and in particular the IDFC – a club of 25 national and regional development banks. In 2017, the International Development Finance Club (IDFC), in collaboration with the Multilateral Development Banks Group (MDB), committed to “align financial flows with the Paris Agreement”. With this framework, the NewClimate Institute and I4CE provide clear and practical guidance to IDFC members on how to align their operations with the requirements of the Paris Agreement. The main objective of the study is to create a framework to help financial institutions evaluate and design their targeting strategies. The study consists of two parts, a conceptual framework for alignment implemented by I4CE and a set of recommendations achievable at the national, strategic and operational levels for IDFC members developed by CPI.
Adaptation to the Paris Agreement has become the new frontier of climate finance. Financial institutions, whether seeking to impact sustainable development or pursue business objectives, are increasingly committed to adapting to the Paris Agreement and enabling close links between the public and private sectors, as well as between local governments and global stakeholders. In 2017, the International Development Finance Club (IDFC), in collaboration with the Multilateral Development Banks Group (MDB), committed to “align financial flows with the Paris Agreement”. Since then, IDFC members, along with other financial institutions engaged in alignment, have recognized that aligning financial flows across all businesses and lines of business involves transformative changes within financial institutions. Part 1, led by I4CE, creates a theoretical and conceptual basis for the alignment, analysis and description of emerging interpretations of definitions, principles and approaches in the financial world and builds on the experience of the Climate Action Initiative in financial institutions. This work was financially supported by the European Climate Foundation. The NewClimate Institute, in collaboration with Germanwatch and WRI, provides contributions to development banks to support the implementation of the. Part 1 is led by I4CE to create a “Paris Agreement Alignment Framework”.
As part of a joint study with the Climate Policy Initiative, this discussion paper proposes a framework that can be used by financial institutions seeking to align their policies and operations with the Paris Agreement. Building on an analysis of how the Paris Agreement has reshaped climate action by focusing on the short-term gradual growth of adaptation and mitigation measures to focus on the long-term transformation of economies and societies, the I4CE Alignment Framework defines three dimensions of action: The framework is based on the premise that there is no single instrument or measure, which allows an institution to adapt to the Paris Agreement; Rather, each financial institution will need a tailor-made mix of instruments based on its individual mandate, objectives and strategy, institutional culture, and areas and areas of focus. The guidelines on instruments and approaches address key issues in four areas: a long-term time horizon to manage impacts: institutions should prioritise actions that are consistent with short-term climate objectives and long-term objectives and that do not lead to binding or erroneous adjustment. An ambitious contribution: institutions should seek to contribute to the ambitious objectives of the agreement by taking measures that: A comprehensive scope: Institutions should seek to support, directly or indirectly, low-greenhouse gas climate resilient development in all areas of activity, taking into account the impact on wider systems and value chains.