In 2017, the International Development Finance Club (IDFC) together with the group of Multilateral Development Banks (MDBs) made a joint commitment to “align financial flows with the Paris Agreement”. With this framework, NewClimate Institute and I4CE provide IDFC members with clear and practical guidance on how to align their operations with the requirements of the Paris Agreement.
Main findings:
In 2017, the International Development Finance Club (IDFC) together with the group of Multilateral Development Banks (MDBs) made a joint commitment to “align financial flows with the Paris Agreement”. Since then, IDFC members as well as other financial institutions committed to alignment have recognized that aligning financial flows across all activities and business lines implies transformational changes within financial institutions.
To support this process, NewClimate Institute and I4CE have developed a framework to serve as initial guidance. The operationalization framework is structured around the six principles of the 2018 IDFC position paper that lays out how members aim to achieve their alignment commitment. For each principle, the framework first lays out what the principle implies for development finance institutions at the strategic, operational, and country levels. Second, based on a review of existing tools and best practice examples, it identifies and provides guidance on a first selection of tools and approaches that may be used by an institution to start the alignment process.
The framework is based on the premise that there is no single tool or metric that will allow an institution to align with the Paris Agreement; rather, a tailored combination of tools will be needed for each financial institution, based on its individual mandate, alignment objectives and strategy, its institutional culture as well as areas and sectors of interventions. The guidance on tools and approaches addresses key questions around four areas:
- Objectives: What concrete outcomes does my institution aim to achieve?
- Key aspects: What are the key aspects of each type of tool, what aspects do I need to pay attention to when using this type of tool? What changes may need to occur within my institution and who needs to be involved? What information do I need to align my activities?
- Existing Approaches and Tools: What approaches and tools are available to make these changes? What are their strengths and weaknesses, how do they address the different dimensions of Paris-alignment?
- Use recommendations for Paris-alignment: What do I need to consider if I want to implement the principle to be fully Paris-aligned?
