Since the establishment of the Paris Agreement in 2015, many initiatives have been launched to galvanize public and private action on Paris Alignment (principles, targets, standards, disclosure, pathway assessments, portfolio temperature assessments). However, there is currently no comprehensive view of progress across the financial system and real economy in relation to alignment with the Paris Agreement. This is essential to make sense of the transitions underway, the outstanding gaps, and to indentify who needs to play which role going forward.

CPI is working to fix this by developing the Net Zero Finance Tracker, which ultimately aims to:

  1. Assess the public and private finance response to climate change.
  2. Integrate benchmarks to assess the alignment of financial stocks and flows with Paris Agreement and net zero emissions objectives.
  3. Identify gaps and opportunities to scale up necessary investments by country, sector, and actor type.
  4. Inform effective prioritization and targeting of policy and public/private investment by corporations, policy makers, regulators, and financial institutions.

Core to the Net Zero Finance Tracker are data dashboards which draw on numerous reporting initiatives and data sources that contribute a piece of the picture on progress. For this, we pull qualitative and quantitative data across three dimensions of Paris Alignment: strategy and target setting (targets), operation and governance processes (execution), capital allocations and real economy investment flows (flows). Multiple data sources are normalized and aggregated into indicators to enable progress to be visualized at the level of financial actor type e.g. insurers, asset managers, and country. Alongside the dashboards, CPI is building a member network of peers to support development and use of the Tracker, filling data and knowledge gaps and informing the decision making of investors and policy makers.

With a development grant from the European Climate Foundation, CPI has begun initial work to develop the concept, a member network, and a data dashboard approach. In Spring 2021, we will release a beta version of a national data dashboard focused on the United Kingdom to serve as a demonstration. We are collecting data on individual financial entities from publicly and privately available sources, including banks, asset managers, insurances, pension funds, corporations, and infrastructure funds. Sources consulted so far include around 40 data providers.

The Net Zero Finance Tracker will evaluate three dimensions of Paris alignment:

  • Targets: signaling intent to respond. This dimension tracks indicative qualitative commitment and quantitative targets adopted to address climate change, as well as membership of initiatives that may influence future capital alignment.
  • Execution: measuring integration of climate considerations into decision-making processes, potentially resulting in future investment flows. This dimension looks at concrete qualitative changes to actor policies, governance and investment approach that may influence future capital alignment.
  • Flows: tracking finance allocated to climate solutions via investment into productive assets/activities and capital markets. This dimension relies on the measurement of quantitative changes in stocks and flows of relevant finance (both low and high emissions).

We are actively fundraising to build out a global Net-Zero Finance Tracker (with an inital contribution from the Austrian Government), which will include a global dashboard, additional national dashboards, and will maintain an active network of members and data providers.

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