We use two main definitions of Paris alignment:
- Institution view: holistic commitment to make investments and overall organizational practices consistent with the achievement of the Paris goals, through the integration of Paris targets across the investment decision chain, from strategy and sourcing through to due diligence. Institutional engagement must be comprehensive across multiple business areas, able to deliver on a long-term horizon, and ambitious in the scale of action taken. Ultimately action should translate in changes in the real economy – through the realignment of portfolios and investment with temperature trajectories compatible with Paris.
- Real economy view: the consistency of trends in emissions and investment observed within key impact sectors with Paris-aligned temperature trajectories.
Alignment alone is not sufficient to accelerate progress towards Paris, i.e., it is not enough to shift all investments into tech and renewables stocks and bonds: there is a set of specific technologies and subsectors that need new investment to enable net zero in hard-to-abate industries.