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Title | [기타] Approaches to meeting the Paris Agreement goals | ||||||||||||||
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OPTIONS FOR PUBLIC DEVELOPMENT BANKSSince the adoption of the Paris Agreement in 2015, several public development banks (PDBs) have responded with structured approaches to align their operations with the Agreement’s expectations. However, many PDBs, particularly those in emerging markets and developing economies, are yet to adopt an approach to align with the Paris Agreement (i.e., Paris alignment). As entities whose investment mandates are established by the Parties to the Paris Agreement (i.e., national governments), PDBs have specific obligations derived directly from these Parties’ commitments to act across all policy and regulatory frameworks under their jurisdictions, including for state-owned or state-mandated institutions and agencies. Accordingly, PDBs are expected to operate in a manner that supports the achievement of the Paris goals. More specifically, they are obligated to integrate their activities within the Agreement’s implementation mechanism by providing financial, technical, and capacity building support that is entirely consistent with national low-emission climate-resilient development pathways. Paris alignment is defined in this context as a response to the specific Paris Agreement expectations vis-a-vis PDBs’ integration within the Agreement’s means of implementation. To be Paris-aligned, a PDB must orient its operations to provide financial, technical, and capacity-building support that is entirely consistent with recipient countries’ low-emission climate-resilient development pathways. This concept of Paris alignment differs fundamentally from approaches that focus on reducing a financial institution’s financed emissions on a trajectory consistent with the Agreement’s overall temperature objectives or that suggest the adoption of a set of climate actions commonly observed by financial institutions. While neither of the alternative Paris alignment concepts above is sufficient to facilitate full alignment of PDBs, some of their components have been used as benchmarks for alignment. This report aims to provide actionable insights for PDBs seeking to align their activities with the objectives of the Paris Agreement by evaluating the main approaches adopted by financial institutions and identifying the key operational benchmarks used to support the implementation of these approaches. APPROACHES TO MAINSTREAMING PARIS AGREEMENT OBJECTIVESThe approach primarily adopted by PDBs is “project-level alignment,” oriented around project-level assessments to ensure that new financing activities fully align with recipient countries’ low-emission climate-resilient development pathways. The primary objective of this approach is the integration of PDB activities within such pathways, facilitating a transition that is consistent with the Paris Agreement’s long-term temperature and climate resilience goals On the other hand, private financial institutions have typically adopted the “portfolio-level net-zero” approach, which aims to achieve net-zero financed emissions at the portfolio level. While there is substantial variation in how this approach is implemented, it generally entails an accounting of financed emissions in an institution’s portfolio, then setting a year-on-year The portfolio-level net-zero approach is far narrower than the project-level alignment approach because it does not obligate consistency with low-emission climate-resilient development. Accordingly, the implementation of a portfolio-level net-zero approach alone would not achieve Paris alignment for PDBs. This divergence in approaches results from the fundamentally different expectations that public and private financial institutions face under the Paris Agreement and the distinct incentives driving their investment activities. Despite this divide, PDBs should at least be aware of how private-sector clients and partners are approaching climate action and, in some cases, may even benefit from strategically adopting aspects of the portfolio-level net-zero approach themselves. While there are myriad ways in which these high-level approaches are implemented across institutions, they are guided by a handful of key methodological frameworks, as shown in Table ES1. Table ES1. High-level approaches and their methodological frameworksALIGNMENT APPROACHES’ USE OF OPERATIONAL BENCHMARKSThe above methodological frameworks are underpinned by operational benchmarks that can help steer each institution’s financial flows toward Paris alignment. The 11 most common benchmarks are mapped by methodology in Table ES2. Table ES2. Methodological frameworks steering financial institutions’ Paris alignmentTo effectively advance all of the Paris Agreement goals, PDBs should select and integrate operational benchmarks that are both practical and impactful. The Joint MDB Methodological Principles & MDB Building Blocks (MDB Building Blocks) offer a foundational approach for PDBs, focusing on improving understanding of their role in achieving the Paris goals and incentivizing the maximization of their impacts to this end. In addition, the concept of “do no harm” should be instilled as a minimum condition for PDB financing activities. PDBs should also seek to use benchmarks to maximize synergies between climate and other objectives in order to make efficient use of human and material resources and ensure applicability to the broad universe of PDBs. Each of the various operational benchmarks offers distinct strengths and weaknesses for PDBs, depending on the bank’s client base and existing level of Paris alignment. While benchmarks can provide transparency, accountability, and measurable guidelines, employing the wrong ones can create operational challenges or conflict with existing priorities or mandates. Additionally, the associated technical capacity and resource requirements may become a hindrance. KEY TAKEAWAYS FROM CASE STUDIESTo better understand the methodological frameworks for Paris alignment approaches (e.g., the MDB building blocks) and the operational benchmarks adopted by financial institutions, this report presents six case studies examining the practices of five PDBs and one private financial institution. These case studies have yielded the following key takeaways:
CONCLUSIONS AND RECOMMENDATIONSOur analysis of Paris alignment approaches, their constituent operational benchmarks, and key takeaways from case studies has led to the following conclusions and recommendations. These aim to guide PDBs in developing and improving their alignment approaches at various stages of implementation. 1: Project-level alignment forms the foundation of PDB support for Paris Agreement goals.
2: Integrating operational tools from the portfolio-level approach can provide strategic benefits for banks that work closely with the private sector or operate in tandem with other governmental agencies on mitigation.
3: Paris alignment is an evolving and ongoing process that requires consistent board and senior management support.
4: Stakeholder engagement is key to developing and implementing a Paris alignment approach.
5: Further research can seek to identify which investments and support activities deliver systemic or transformative impacts.
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