The Rocky Mountain Institute's Center for Climate-Aligned Finance aims to help financial institutions transition to a net-zero future by establishing climate alignment as a global norm and collaborating with various stakeholders. The emergence of climate alignment in the financial sector has been driven by increased commitments and methodologies regarding sustainability, with private financial institutions urged to increase low-carbon investments and support the transition of carbon-intensive sectors. Recent initiatives have focused on assessing climate alignment and developing tools and frameworks to facilitate these commitments, indicating a matured response to the challenge of climate change.

1. ROC
KY MOUN
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Why Financial Institutions are
Measuring Climate Alignment
James Mitchell, Director

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An engine room bringing together financial institutions and their clients
The Center For Climate-Aligned Finance
PILLAR 4:
Shaping The Global
Conversation
PILLAR 3:
Supporting Individual
Firms
PILLAR 2:
Developing Global
Frameworks
Sectoral Focus: Steel, Oil
and Gas, and Utilities
PILLAR 1:
Building Sectoral
Agreements
Navigating Climate
Alignment Landscape,
Policy and Frameworks
Advisory and Fee-for-
service for Financial
Institutions
Communications and
Outreach
Drawing on RMI’s unique insights into market-driven change across the real economy and the financial sector,
the Center aims to play a central role in enabling financial institutions to drive the transition to a net-zero future
in partnership with their clients. The Center works to articulate climate alignment as a norm and to
catalyze the agreements, frameworks, and practices to operationalize climate alignment globally. It
works collaboratively with financial institutions, industry, and other organizations globally to achieve this.

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A snapshot of partnerships and thought leadership
PARTNERSHIPS
Founding Partners
Supporters
Partners
Partnerships and Supporters

4. Dec 2017: MDBs & IDFC
commit to align financial
flows with Paris
Dec 2017: The Platform Carbon
Accounting Financials (PCAF) releases
report on footprinting methodologies
for financial portfolios
Sept 2018: ING to
measure & align
loan book with 2ºC
scenario
May 2019: IIGCC
Paris Aligned
Investment Initiative
to develop
methodology for
institutional investors
July 2020: Center for
Climate-Aligned
Finance announced
Sept 2019: UNEP FI Net-Zero Asset Owners
Alliance (NZAOA) announce commitment to
align portfolios with net zero emissions
trajectory, Collective Commitment to Climate
Action banks announce to align portfolios
with <2°C
2018 Sept 2018: Corporates, project developers,
real estate investors pledge to align
portfolios with net zero emissions, and 2dii
launches PACTA methodology and tool for
Paris alignment
Mar 2019: BNP Paribas
to align loan book
with 2ºC goal by 2025
Dec 2018: ING, BNP Paribas,
BBVA, Soc Gen, Standard
Chartered to measure and align
loan books with well below 2ºC
Dec 2018: MDBs & IDFC
announce a joint
framework for Paris
alignment
Dec 2018: PCAF to develop
methods to assess climate
impact of loans & portfolios for
North American banks
Mar 2019: Global
Alliance for Banking
on Values to assess
and disclose climate
impact of their
portfolios
2019
June 2019: Poseidon
Principles launched, where
banks measure & disclose
climate alignment of shipping
portfolios
The Emergence of Climate Alignment in the Financial Sector
July 2020: 16
German banks
pledge to align loan
books with <2 °C
2017
2020
April 2020: NZAOA
begin to develop
harmonized
methodologies for
alignment, while SBT-FI
presents draft method
for public consultation
March 2020: Barclays
commits to align
portfolio with Paris

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ROC
KY MOUN
TAIN
INSTITUTE
HOW HAS CLIMATE ALIGNMENT EMERGED?
CLIMATE ALIGNMENT IS THE “END STATE” OF THE EVOLUTION OF EXPECTATIONS OF THE FINANCIAL SECTOR
AVOIDING ADVERSE
IMPACTS
2003: The Equator
Principles provide a
minimum standard for
assessing and
managing
environmental and
social risk
CONTRIBUTING
TO SOCIETY’S
GOALS
2017: The Task Force on
Climate-Related Financial
Disclosures help mainstream
expectations of climate-
related disclosure
2019: The Principles for
Responsible Banking
expect banks to “set
targets in line with
society’s goals”
IMPROVING
CLIMATE-RELATED
DISCLOSURE
2015 – Present: Proliferation of
sustainable finance
commitments and policies
excluding new coal financing
“I’m not part of
the problem”
“I’m actively
driving
solutions”
ROC
KY MOUN
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INSTITUTE
2015: Paris Agreement calls for
“making financial flows consistent
with a pathway towards low
greenhouse gas emissions and
climate resilient development”
SUSTAINABLE
FINANCE
COMMITMENTS

6. What Does Climate Alignment Mean for Private Financial
Institutions?
1) Increase low-carbon investment
2) Support the transition of carbon-
intensive sectors
$Valueofassetsintherealeconomy
Merging onto a climate aligned pathway will require
financial institutions to 1) increase low-carbon investment
and 2) support the transition of carbon-intensive sectors.
Climate alignment means committing to take the steps
necessary to merge onto a 1.5°C glidepath.
A climate alignment commitment is a commitment to assess alignment with climate targets and improve
that alignment over time. It is a commitment to influence the real economy.

7. Landscape of Initiatives
Efforts to enable private financial institutions to act on climate commitments
E F F O R T S U N D E R W AY T O E N A B L E F I N A N C I A L I N S T I T U T I O N S T O A C T O N C L I M AT E C O M M I T M E N T S
Initiatives that span multiple barriers through their objectives have been illustrated as such. Various initiatives provide tools, frameworks, methodologies and are unique
in their solutions. Offerings may also vary based on geographic region. Illustration is not exhaustive of all initiatives but captures major efforts happening today.
Assessing
Climate alignment
and setting targets
Pathways
Translating decarbonization pathways
for use by the financial sector
Collective Action
A maturing response to the
challenge of influence
Data
Can reporting standards
help fulfill data needs?
Climate Action 100+
Powering Past Coal Alliance
Finance Principles
Investor Agenda
Methodology to assess and
disclose financed emissions
PCAF
Target-setting
Science-based Targets for
Financial Institutions
Scenario-analysis tool
PACTA
Defining transition pathways to inform
actions by corporates, customers and
financial institutions
Mission Possible Platform
Poseidon Principles (shipping sector only—lenders, lessors and guarantors)
Global Alliance for Banking on Values—Climate Change Commitment
Principles for Responsible Banking
Collective Commitment to Climate Action
Methodological review efforts
IIGCC Paris Aligned Investing Initiative
TCFD
Assessing transition preparedness
Transition Pathways Initiative
Assessing Low Carbon Transition
Market-led disclosure standard
Poseidon Principles (shipping sector
only—lenders, lessors and guarantors)
Reporting and disclosure standards
International Integrated Reporting Council
(IIRC)
Global Reporting Initiative (GRI)
Climate Disclosure Standards Board (CDSB)
Sustainability Accounting Standards Board
(SASB)
Climate-related financial risk disclosure
TCFD
Key:
Other
Asset Owners
Institutional Investors
(Asset Owners and Asset Managers)
Commercial Banks
Collective commitments to action
Net-Zero Asset Owner Alliance

8. Collective Action
A maturing response to the expectations of influencing the real economy
Key Insights
• A climate alignment commitment is a commitment to
assess alignment with climate targets and improve that
alignment over time. It is a commitment to influence the
real economy.
• The past three years have brought a considerable
increase in the scale, ambition, and specificity of
voluntary climate alignment initiatives with three types
emerging: broad climate alignment commitments, broad
collective engagement and advocacy platforms, and
sector-specific initiatives.
• Asset owners and lenders are making broad climate
alignment commitments, whereas the Poseidon
Principles focuses on Lenders.
• Asset managers are not making alignment commitments.
Instead, they are joining collective influence initiatives
(e.g. CA 100+) and and some are offering funds that are
climate risk-adjusted or constructed to maximize
exposure to green revenues under the EU taxonomy.
THE ROLE OF KEY STAKEHOLDERS
in the Investment Value Chain is Rapidly Being Shaped by the Current Landscape on Climate
Source: Adapted from the Climate Finance Leadership Initiative
Asset Owners
Asset Managers
Banks
Corporations
Insurance
Companies
Active Funds
Project
Developers
Other
Corporations
Listed
Corporations
Assets in the real economy
Passive Funds
(index tracking)
Central Banks &
Financial Regulators:
Supervise financial
institutions
Credit Rating Agencies:
Assign credit ratings
Delegate Assets
Sell shares
and bonds
Co-lend
Lend
List shares
Underwrite
bonds & shares
Build, own & operate
Direct ownership,
ownership through
shares & lending
through bonds
Exchange &
Trading Platforms:
Handle trading
in shares & bonds
Lend and provide
risk-sharing tools
in emerging markets
Developing finance
institutions
Subsidies, incentives,
policies influence
investments
Ownership
Governments
Index
Providers:
Set index
composition
Pension
Funds
$
$
$
$
$
Commercial
Banks
Investment
Banks
$
Efforts underway to
enable financial
institutions to act on
climate commitments
$
Other
Institutional
Investors
Sovereign
Wealth Funds

9. • Visit: Climatealignment.org for more
information
• Get Involved: Subscribe to our news
updates: https://climatealignment.org/get-
involved/
• Follow us: @ClimateAlignmnt
• Email: jmitchell@rmi.org
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