Investor Portfolio Alignment with the Paris Agreement

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The Paris Agreement’s long-term temperature goal is to keep the increase in global average temperature to well below 2C above pre-industrial levels. Under this agreement, each country must plan and report on their climate change mitigation actions. Institutional investors (insurance companies, pension funds, sovereign funds, banks, asset managers) are now increasingly looking to align their strategies with the Paris Agreement. They also want to assess and report on portfolio alignment in practical terms.

S&P Global Sustainable1 approach to investor portfolio alignment assesses individual corporate decarbonization rates against those required to achieve the goals of the Paris Agreement, and combines them into a portfolio-level assessment of alignment. Trucost’s approach can be widely applied and is both sector and asset class independent, applying two alignment methodologies initially developed by academics and further developed by the Science Based Targets Initiative (SBTi).