Portfolio Alignment to a 2°C Trajectory: Science or Art?

16 Pages Posted: 3 Aug 2020

See all articles by Julie Raynaud

Julie Raynaud

affiliation not provided to SSRN

Peter Tankov

ENSAE Paris

Stéphane Voisin

Institut Louis Bachelier

Date Written: July 6, 2020

Abstract

The concept of portfolio alignment to a temperature trajectory has gained momentum among investors and regulators since the 2015 Paris Agreement recognized the importance of the financial sector for the low carbon energy transition. Yet, a clear definition and a transparent methodological framework for alignment assessment with a temperature trajectory, or portfolio temperature alignment, are presently lacking and few academic studies have addressed this question. This paper provides a definition of portfolio temperature alignment, reviews the key methodological steps in computing alignment measures, and highlights the main scientific challenges, with the aim to stimulate further research on this topic. We review, analyze and place in context the main findings of the recent technical review of portfolio temperature alignment assessment methodologies by Institut Louis Bachelier.

Keywords: energy transition scenario, CO2 emissions, portfolio alignment to a temperature trajectory, scenario uncertainty

Suggested Citation

Raynaud, Julie and Tankov, Peter and Voisin, Stéphane, Portfolio Alignment to a 2°C Trajectory: Science or Art? (July 6, 2020). Available at SSRN: https://ssrn.com/abstract=3644171 or http://dx.doi.org/10.2139/ssrn.3644171

Julie Raynaud

affiliation not provided to SSRN

Peter Tankov (Contact Author)

ENSAE Paris ( email )

92245 Malakoff Cedex
France
91400 (Fax)

Stéphane Voisin

Institut Louis Bachelier ( email )

Palais Brongniart
28 Place de la Bourse
Paris, 75002
France

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