Tackling climate change has been an important part of WRI`s sustainable investment approach from the start. We have made significant progress on this front: we have prioritized investments in clean technology, increased the allocation for impact investments that provide solutions to sustainability challenges, and worked with companies as an active participant in the Climate Action 100+ initiative. But our broad ESG focus had its limitations. This became particularly evident after we learned that some of the ESG products in our portfolio had higher emission intensity than their benchmarks. Although we were able to solve this problem, the finding showed that our approach did not allow us to drive change to the extent required or to take into account the multiple global risks and opportunities of climate change. Given the magnitude of the climate challenge, we have seen the need to further refine and strengthen our climate approach in our portfolio. Multilateral Development Banks (MDBs) have committed to aligning their operations with the Paris Agreement. This is not only a commitment stemming from Article 2.1c of the Paris Agreement, but it also brings many benefits to banks and their client countries: it fulfills banks` broader development mandate and can help their client countries achieve their national goals and development gains by moving to modern, carbon-free technologies. It will also avoid sequestration of carbon-rich infrastructure and reduce exposure to climate-related financial risks from stranded assets.
While the Paris Agreement`s goal of limiting temperature rise to 1.5°C has received the most attention from investors, the goal of adaptation, resilience and low-carbon development is also crucial. This year`s events – including massive social uprisings for racial justice – demonstrate the acute need for climate action beyond decarbonization to advance environmental justice and improve the resilience of frontline communities. This leads to a new level of complexity in our approach, as issues like social justice are harder to translate into an investment context than something like carbon emissions, which are easier to quantify. But these challenges are no less urgent to solve and no less important to achieve the objectives of the Paris Agreement, so we will try to address them within the framework of the specific objectives of our strategy. It is likely that our approach to portfolio emission reductions will be more sophisticated from the outset thanks to the quantitative data and methodologies available. Nevertheless, we will continue to advance resilience and equity issues in our portfolio because we know we will learn and improve over time. On this basis, the research then proposes various tools and approaches to align portfolios with temperature targets, based on existing instruments and activities in multilateral development banks. Our experience in creating the statement has been full of discoveries, and we strive to share lessons and learn from the many other asset owners who are working towards a similar goal. In addition to sharing the full statement on our website, we offer four considerations that can help asset owners evaluate a climate investment strategy. The next step in implementing our climate investment strategy – working to align our foundations with the goals of the Paris Agreement – will be a humiliating process. We know very well that the details of the plan can change, especially as knowledge, resources and investment opportunities evolve.
At the same time, however, we recognize that we are not starting from scratch with our wallet or tackling it alone. We will support and contribute to increasing knowledge and resources for Parisian investment developed by a very active and collaborative community of practice. As we begin this next chapter of our journey, we look forward to sharing more lessons along the way. The analysis begins with a review of the scientific scenarios in order to understand what the temperature target means for different investment areas. In the midst of a global pandemic and economic recession, alarming indicators of climate change continue to rise. They underscore the urgent need for radical changes in our global economy as we hope to avoid the worst effects of climate change and achieve a more resilient and equitable future. Political reform will be the key to these efforts. But with the means to drive widespread business transformations, investors can play a key role in accelerating this transition. WRI is increasingly taking on this role by administering its $40 million foundation.
The two asset allocation targets include the quantitative portfolio targets already in place: maintain 0% exposure to fossil fuel companies and commit 15% of the portfolio to investments in low-carbon, climate-resilient and sustainable private markets by 2022. sold. In line with our beliefs in climate investing, our short-term financial analysis of investments has indicated that this step towards a Paris-oriented orientation is also in our financial interest. As asset owners, we know first-hand how useful a detailed investment framework or strategy can be – as a resource for others, as a guide for investment advisors, and as an accountability tool. In this context, our strategy section outlines five objectives that will align the investment portfolio with our Paris alignment objective, each with a series of time-limited activities to manage implementation. Alignment with the Paris Agreement has several dimensions, including alignment with long-term climate change mitigation and adaptation objectives, as well as support for the improvement and implementation of Nationally Determined Contributions and other country-specific strategies and plans. This article analyzes one of these dimensions, namely the focus on the long-term mitigation goal or the Paris temperature goal, keeping global warming well below 2°C and striving to limit it to 1.5°C. The article explains how Paris-oriented scientific scenarios and research can be used for decision-making. It reviews the relevant existing climate instruments used by seven major multilateral development banks and proposes additional tools to assess the alignment of Paris at the project level for two particularly emitting sectors: energy and transport infrastructure.
The working paper also makes recommendations on how SED operations can be aligned with the Paris Agreement beyond direct investment financing, such as loans through financial intermediaries and policy-based lending. It highlights the need for transparency to improve reporting on the direction of the entire portfolio and pipeline and the disclosure of climate-related financial and financial risks. Over the next year, we will strive to set additional quantitative targets related to decarbonisation and lead a just and resilient transition. For example, for our emission reduction targets, the first step will be to apply the scientific targets temperature scoring tool to our portfolio_ anzuwenden._ from where we will set five-year targets that will put our portfolio on a trajectory consistent with the temperature targets of the Paris Agreement. Flattening the details of these and other goals will be at the heart of achieving our climate goals, so that`s where the real work begins. The research aims to provide a better understanding of the current state of affairs and options for further measures to align moS investments with the Paris Agreement. Lessons can be learned not only for the MDBs, but also for other development finance institutions and private financial institutions that want to align their investments with the Paris temperature target. Instead of including climate change in our Permanent Declaration of Investment Policy (SPI), WRI decided to develop a stand-alone statement in line with the existing investor network guidelines. This gave us the space to systematically address the issues raised by the Task Force on Climate-related Financial Disclosures (TCFD), as well as other key issues we had to raise. .