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
To learn more
  • 07/02/2025 Foreword of the week
    Bridging the gap: high-level climate & development finance commitments and the reality on the ground

    The 4th International Conference on Financing for Development (FFD4) in Seville represents a milestone for delivering on development (including climate action) goals, a decade after the adoption of the Sustainable Development Goals and the Paris Agreement. The “Seville Commitment” was adopted on June 30th, albeit in the absence of the United States – demonstrating that widespread support remains for a comprehensive package to finance development. However, the outcome also embodies the growing chasm between high-level commitments and the reality of financing for development and climate action on the ground. Recent research by I4CE attempts to bridge this gap on two crucial issues. 

  • 05/28/2025
    How can financial intermediation better contribute to the climate transition?

    This report aims to support better use of financial intermediation by public development banks (PDBs) providing international development finance, helping PDBs work better together as a system, with a common understanding of where they contribute the most to low-emissions and climate-resilient development. It mainly focuses on financial intermediation through on-lending to public (government-owned) financial institutions in developing countries.

  • 02/21/2025 Foreword of the week
    Public development banks: towards higher climate ambition

    Next week, representatives of public development banks and their stakeholders will gather in Cape Town for the 5th Finance in Common Summit (FiCS), to discuss how public development banks can align all their activities with the Sustainable Development Goals, the Paris Agreement, and the Global Biodiversity Framework. As the global network of public development banks, Finance in Common represents about 10% of total global development investments each year, which must all align with sustainable development pathways. This year, the discussions at FiCS will take place while South Africa hosts the first meeting of the G20 Finance Ministers and Central Bank Governors, with a focus on solidarity, equality, and sustainability.

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