Long-term strategy use for Paris-aligned investments

28 June 2022 - Climate Report - By : Sarah BENDAHOU / Alice PAUTHIER / Ian COCHRAN, Phd

This I4CE report focuses on the role of countries’ Long-Term Strategies (LTSs) in the Paris alignment approaches of Development Finance Institutions (DFIs). It explores the possible roles of both the LTS development process and the resulting LTS document in providing insights on the Paris alignment of investments within investment decision-making processes. The findings are relevant for a broader range of financial institutions.  More and more development finance institutions are committing to aligning with the Paris Agreement and are using different approaches and benchmarks to determine whether their investments would be aligned with the Paris Agreement goals. As the transition towards low-greenhouse gas climate-resilient development will be specific to each country, these institutions are increasingly exploring the use of countries’ long-term strategies (LTSs) as they seek to implement Paris-aligned investment strategies.  

 

 

Growing expectations that long-term strategies will help to determine the Paris alignment of financial flows

Although LTSs are voluntary at present, the Glasgow Climate Pact adopted at COP26 in 2021 urges Parties to communicate them and to update them regularly. It is expected that their number will continue to grow, that their quality will improve, and that such strategies will be increasingly referred to and used by economic actors, and in particular by DFIs. LTSs ideally represent a country-owned long-term vision with the potential to help stakeholders, including DFIs, to better understand the key dimensions of a country’s climate ambitions. For practitioners, LTSs can potentially ensure short-term policies and targets, including nationally determined contributions (NDCs), are consistent with the long-term goals of the Paris Agreement and can help to steer and inform discussions on increasing the long-term level of ambition.  

 

 

The LTS should be used during upstream DFI country dialogue to support transformative climate outcomes in the country

Initial experience suggests that DFIs should use LTSs and other country-specific inputs as early as possible in the project cycle, including in the identification and design stage, in order to support alignment. Both DFIs and experts have also noted the strong potential of LTSs and their development process to inform the definition of DFI country intervention strategies, and the potential for their use in country dialogue. This potential use of LTSs in country dialogue is even more significant if DFIs support the LTS design process, enabling a deeper understanding of policy discussions and of the aspirations of the different country stakeholders that should be involved in this country-owned process.  

 

 

DFIs should continue to proactively offer both technical and financial support for the development and operationalisation of robust LTSs

In order for LTSs to fully realise their potential as instruments to increase the overall alignment of internationally financed activities in a country, a number of challenges need to be addressed. Recommendations, applicable to countries and entities developing or supporting LTSs, and to DFIs, have been identified to address these challenges, and are detailed in the last section of this report.

 

Click on this button to see the image

 

What are long-term strategies? How can they contribute to aligning with the Paris Agreement? And how can they be useful for public development banks? Sarah Bendahou answers these questions in 2 minutes:

 

Long-term strategy use for Paris-aligned investments Download
I4CE Contacts
Sarah BENDAHOU
Sarah BENDAHOU
Research Fellow – Development finance Email
Alice PAUTHIER
Alice PAUTHIER
Project Manager – Development finance Email
To learn more
  • 12/01/2023 Foreword of the week
    COP28 : It’s money time !

    COP28 in Dubai kicks off amidst a worrying climate backdrop. For the first time, the threshold of a 2°C temperature rise compared to the pre-industrial era was exceeded in one day. In addition, a report published by the UN this week warns that current policies are placing the planet on a warming trajectory of 2.9°C, and that the chances of maintaining the increase at +1.5°C are now of only 14%. The results of the first Global Stocktake, a worldwide assessment of the actions taken by countries since the Paris Agreement, will be published at the COP and should confirm the urgent need to change the trajectory of greenhouse gas emissions. 

  • 11/29/2023 Blog post
    Climate finance: multiplying the numbers will not solve the equation alone

    Much of the discussions at COP28 will focus on the 100 billion USD/year target decided at Copenhagen to support climate investments in the Global South, and on the new climate finance goal set to replace it. But, whilst keeping our eyes on the volumes laid on the table, we also need to look more into the impact of every dollar spent. Identifying and building on the value added of every actor in the economy is essential to avoid overlaps and maximise synergies. Three types of actors have a pivotal role to play in the paradigm shift: governments, public financial institutions and private financial institutions.

  • 10/30/2023 Blog post
    Response to GFANZ APAC on financing the early retirement of coal-fired power plants

    NewClimate Institute and the Institute for Climate Economics (I4CE) submitted a response to a public consultation on the Glasgow Financial Alliance for Net Zero’s proposed set of voluntary guidance for financing the early retirement of coal-fired power plants in Asia-Pacific. This blog post highlights key points from our submission. Preventing the worst impacts of the climate crisis, particularly for the most vulnerable, requires halting coal-fired power plants (CFPPs) in the pipeline and retiring a substantial portion of the existing global coal fleet before the end of their technical lifetime. While countries have committed to phase out unabated coal in the Glasgow Climate Pact, 350 GW of new capacity is proposed globally with an additional 192 GW under construction.

See all publications
Press contact Amélie FRITZ Head of Communication and press relations Email
Subscribe to our mailing list :
I register !
Subscribe to our newsletter
Once a week, receive all the information on climate economics
I register !
Fermer