Finance Sector Alignment with International Climate Goals Reviewing Options and Obstacles

The landmark Paris Agreement adopted in 2015 established a clear objective for the fight against climate change: limiting global warming to well below +2°C (<<2°C) above preindustrial levels. Furthermore, the agreement also specifies the need to make finance flows consistent with this goal. This amounts to a fundamental paradigm shift, scaling up climate finance from a niche of the finance sector to a mainstream alignment of finance flows with climate goals. The report aims to increase the understanding of the impact of this paradigm shift, specifically regarding two issues:1) What are options and obstacles to measuring the alignment of financial flows with climate goals?2) How do different approaches aiming to improve such an alignment fare in terms of their feasibility, acceptability, impacts well as tradeoffs and inconsistencies?The report combines information from multiple disciplines and sources in order to provide a comprehensive overview of the challenges and a critical discussion of selected options. It is based on literature review, data analysis and benefited from feedback from an expert workshop held as well as informal expert feedback.This report is a contribution to the Green-Win project which is supported by the European Horizon 2020 Research and Innovation Programme and seeks to identify the win-win tools and strategies that can help to overcome barriers to the implementation of sustainability and climate action. The finance sector can be a stumbling block or an enabling factor to this end. By examining factors that bias finance towards short-termism and perpetuation of existing production and consumption patterns as well as market and policy responses to overcome such existing bias, the report aims to increase the knowledge base of stakeholders and develop solutions to overcome financial barriers to upscaling of identified win-win solutions. The report also contributes to the overall project aim of developing coherent global narratives for linking climate change and sustainable development goals