The need for harmonized standards and approaches for quantifying the greenhouse gas (GHG) impacts of investments
The implementation of the Paris Agreement to holding the increase in the temperature to well below 20 C above preindustrial level requires financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development (Article 2.1c, Paris Agreement).
Equally, achieving the Sustainable Development Goals (SDGs) requires an enormous transition away from fossil fuels towards sustainable, low-carbon development, backed and supported by appropriate financial flows. This entails green financing, for example through green bonds, and the impact of the SDGs on climate mitigation can be assessed by measuring and reporting the greenhouse gas and environmental footprint of financial flows and investments.
The transparency, accuracy and comparability of climate actions, also called upon by the Paris Agreement, are the key pillars to build mutual trust and confidence among all actors in order to quantify and report the greenhouse gas emissions of their financial contribution/investments.
Estimating the impact of investments on greenhouse gas emissions in a transparent and comparable manner can be achieved only through common principles for GHG accounting supported by credible and robust standards. However, a plethora of standards currently available creates confusion among climate actors (e.g., donors, clients, and co-investors).
In the light of the foregoing, there is a strong and urgent need for credible, harmonized and widely accepted standards covering a broad range of economic sectors that meet the expectations of the climate investors.
Infographics 1: The need for harmonization on estimating impact of investments on GHG emissions