July 21, 2021

2° Investing Initiative responds to the TCFD’s consultation on portfolio alignment


From June-July 2021, the Taskforce on Climate-Related Financial Disclosures (TCFD) sought public comment on two documents: Proposed Guidance on Climate-related Metrics, Targets, and Transition Plans and the associated Measuring Portfolio Alignment: Technical Supplement. In response to the consultation, today 2° Investing Initiative published a report containing our feedback and recommendations on portfolio alignment and implied temperature rise methodologies. It builds on 8+ years’ experience in designing portfolio alignment concepts and methodologies for financial portfolios as part of the PACTA Research Program, as well as testing these approaches with financial institutions around the world.

The report is designed to support the TCFD Portfolio Alignment Team and the broader regulatory community in moving towards harmonization of portfolio alignment and implied temperature rise methodologies. It is also intended to contribute to upcoming alignment discussions that are likely to follow in the run-up to COP26.

Our key recommendations are as follows. For more details, please read the report, and don’t hesitate to contact us if you have any comments or questions.


  1. The Portfolio Alignment Team (PAT) and the broader alignment community should consider developing tailored recommendations regarding which methodologies serve which users, and aim to bring a minimum harmonization to that area rather than trying to make uniform recommendations for aggregated ITRs.
  2. The final PAT paper should recognize the importance of production and capital stock metrics more explicitly, in particular in Judgement 3 and Recommendation 9, where the paper concludes that single-scenario based alignment metrics should only be expressed in emission intensity.
  3. The final paper should acknowledge that aggregated ITRs are not necessarily scientifically more robust than alignment approaches that stay on the sectoral level, and that expressing alignemtn in the form of a precise temperature score could potentially be misleading.
  4. the paper should also recognize the fact that an ITR cannot be meaningfully calculated on the level of an entire financial institution, and that it’s too soon to tell whether they are incentive-optimal.
  5. FIs measuring alignment should show year-on-year whether alignment improvements were the result of companies reducing real world emissions or portfolio composition changes (e.g. buying existing assets, divestments, etc.)

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