Research Collaborative Workshop on measuring the alignment of investments and financing with climate objectives, 7th OECD Forum on Green Finance and Investment (6-9 October, 2020) – Session 2.B - Alexander Dobrinevski, Senior Analyst, Environmental Finance, OECD

1. MEASURING THE CLIMATE CONSISTENCY OF
INVESTMENTS AND FINANCING
Alexander Dobrinevski
Climate, Biodiversity and Water Division
OECD Environment Directorate
07 October 2020, OECD, Paris

2. • Introduction to OECD work on climate alignment
• Pilot study: Investments in the United Kingdom’s buildings sector
• Outlook for future work
7 October 2020 2
Outline

3. 3
INTRODUCTION TO
OECD WORK ON CLIMATE ALIGNMENT
7 October 2020

4. 7 October 2020 4
Consistency with climate objectives
Source: Natixis (2019)
• … requires not only scaling up aligned flows (“climate
finance”), but also reducing misaligned flows
• … requires an economy-wide perspective covering both
the financial markets and the real economy
• … covers public and private investments
Article 2.1 of the Paris Agreement:
a) MITIGATION
b) ADAPTATION AND RESILIENCE
c) FINANCE: Make finance flows consistent with a pathway towards low
greenhouse gas emissions and climate-resilient development.

5. 7 October 2020 5
OECD work on measuring climate alignment
• Connect relevant actors and initiatives
• Conduct own research on climate consistency of real
economy investments
– Test data availability
– Explore different reference points for evaluating the
consistency with climate objectives
– Identify next steps for scaling up such analyses
→ Three country- and sector-level pilot studies in 2019-2020

6. 6
PILOT STUDY: INVESTMENTS
IN THE UK BUILDINGS SECTOR
7 October 2020

7. 7 October 2020
Pilot study on climate consistency of UK buildings
investments
• Close collaboration with UK Department for Business, Energy
and Industrial Strategy
• Residential and non-residential buildings located in the UK
• Construction and renovation investments,
a total of GBP 150 billion in 2019
40%
60%
Buildings
Other sectors
Investments GHG emissions
32%
68%
Buildings are not on track towards 2030 climate change mitigation targets, both in the UK and globally
Source: CCC, “Reducing UK Emissions - 2020 Progress Report to Parliament” and IEA, “Tracking Buildings 2020”
7
(scope1+2)

8. 7 October 2020 8
Quantifying climate-aligned and climate-misaligned
investments
• National accounts
• ~700k property transaction prices
• ~750 corporate reports
Investments
Climate performance
• ~20m Energy Performance
Certificates
• ~10 corporate reports
• GHG inventories and energy
consumption statistics
Investments by EPC class
Investments in low-carbon buildings
Investments in energy efficiency renovations
…
Example: new residential construction investments, 2010-19
Example: construction of new office buildings, 2015-19
Example: Residential insulation & heating measures, 2010-19
1% 76% 19% 4%
A B C D-G
14% 86%
Energy efficiency measures Other renovation
33% 63% 4%
Climate Bond eligible out of scope
above emissions threshold

9. 9
OUTLOOK FOR FUTURE WORK
7 October 2020

10. Collaborative progress towards economy-wide measures of climate alignment for investments and financing
7 October 2020 10
A winding road towards a comprehensive analysis of
climate alignment of economy-wide investments
Collect granular investment data
– Aggregate investment volumes from
national statistics, company reports, and
household surveys
– Primary data collection to complement
existing data sources, which not always
distinguish climate-relevant categories
Collect granular climate performance data
– GHG emissions from national inventories,
administrative databases and company reports
– Asset-level data where available
Choose suitable reference points
– Tradeoff between granularity (evaluating
individual investments) and aggregation
(connecting to carbon budgets, policy objectives,
Paris alignment)
– May require dedicated modelling to refine
scenario projections

11. 7 October 2020 11
Potential directions for future work
→ Inform finance-related elements of the 2023 UNFCCC Global Stocktake
→ Complement physical climate-related statistics e.g. in OECD green growth indicators
Institutionalise consistency analysis on country level and internationally
→ Explore different countries and sectors through further case studies
→ Include cross-country effects (carbon leakage) by analysing a sector globally
→ Incorporate simpler, more timely and less resource intensive indicators
→ Leverage synergies with other OECD streams of work, e.g. on taxonomies and scenarios
→ Connect alignment to reduction of climate risks in the financial system and in the real economy
→ Ensure eligibility of investments for green financing instruments
Improve methodology for measuring climate alignment
Explore economic benefits of climate-aligned investments and financing

12. MEASURING THE CLIMATE CONSISTENCY OF
INVESTMENTS AND FINANCING
www.oecd.org/env/researchcollaborative
Raphael.JACHNIK@oecd.org
Alexander.DOBRINEVSKI@oecd.org