Monday, 2 December 2024.
Follow the money.
In support to the doers, if you are a student preparing a paper, or an advisor writing a policy to a private company or even lobbying, this article might be useful.
Incomplete assessments and limited approaches.
These are the main warnings from the report “OECD Review on Aligning Finance with Climate Goals. Assessing Progress to Net Zero
and Preventing Greenwashing”.
The review brings together the best available evidence with the aim of alerting financial sector stakeholders to key “blind spots”. As such, it really goes into the details of everything that is being said and done about this contemporary challenge.
Although financial sector policies integrating climate change considerations more than quadrupled between the adoption of the Paris Agreement and 2023, when you refer to “climate-alignment” assessments, there is still neither global methodological transparency nor a set of complementary metrics to address greenwashing risks.
The review suggests 4 dimensions of climate mitigation alignment assessment methodologies, each one with several options:
Financial asset class coverage
Selection of climate mitigation scenarios
Choice of climate performance metrics
Aggregate alignment analysis
So that you have an idea of the type of contents of this report, it brings an interesting table (2.4) comparing three emissions performance metrics for corporates and related financial assets. They are:
Absolute Emissions Contraction: difference in GHG emissions
Sectoral Decarbonisation Approach: GHG emissions divided by physical output
Economic Intensity Contraction: GHG emissions divided by economic output
Which one should a bank, a company, a country use?
The review also briefly analyses emissions offsets. But cautions that the current SBTi standard states that offsets cannot be counted as reductions towards meeting a near-term target set by corporates.
Message One is then about methodology, comparativeness and transparency.
And if, in one hand, new investments in clean energy reached USD 1.7 trillion in 2022, surpassing USD 1.5 trillion for fossil fuels, on the other, banks continue to finance fossil fuel supply heavily, with an estimated USD 1 trillion in 2022, compared to USD 0.7 trillion for low-carbon energy.
Message Two is that it is not only about scaling up finance for climate solutions and transition activities but also redirecting finance away from activities undermining climate mitigation and resilience goals.
Download the 133-pages report or click here for the press release.
Group working with over 100 countries, the OECD the Organization for Economic Cooperation and Development is a global forum that promotes policies to preserve individual liberty and improve the economic and social well-being of people around the world.
If interested, click here for the list of members, in their several categories.
Last week we had another post about OCDE, discussing another recente report “Pricing Greenhouse Gas Emissions 2024: Gearing Up to Bring Emissions Down”.
