Our Experts

Climate alignment is the process of bringing the global economy’s emissions in line with 1.5°C temperature targets.

Every actor in the global economy has a role to play in this transition. In practice, achieving net-zero emissions in the real economy will require scaling up low-carbon solutions while transitioning high-carbon assets and companies across global sectors, including carbon-intensive sectors where abatement remains especially difficult.

As global climate ambition increases and net-zero commitments proliferate, climate alignment is establishing a new paradigm for the financial sector with redefined expectations around the role for financial institutions in advancing the net-zero transition.

Financial Institutions (FIs) are increasingly expected to play a critical and proactive role in the net-zero transition—not only scaling up green investments or restricting the financing of high-emitting activities, but also actively supporting the transition of carbon-intensive industries to net-zero emissions.

For private FIs, climate alignment means actively using their levers of influence—such as lending and investment decisions, advisory services, capital markets activities, and non-revenue-generating efforts like stewardship and advocacy—with the intent of helping to move the real-economy toward net-zero emissions.

Climate alignment increasingly requires private FIs to respond to increasing pressure from their shareholders, clients, and customers to act on climate. However, it also introduces an opportunity for FIs to proactively create and capture value from an expanding pool of low-carbon investable opportunities through innovative alignment-linked products and services.

By reorienting their strategies to reduce the carbon footprints of their lending and investment activities and supporting their clients’ transitions toward net-zero emissions, FIs can minimize transition and reputational risks, create a competitive edge, and actively support progress toward global climate goals in the real economy.

Climate alignment will require banks, insurers, asset managers, and asset owners to address key barriers in partnership with corporate partners and governments. These barriers include choosing between multiple decarbonization pathways, sourcing adequate data and navigating methodologies to assess climate performance, overcoming competitive disadvantages, and aligning lending and investing portfolios despite an insufficient supply of investible assets in the market today.

The Center for Climate-Aligned Finance (the Center) was established as an “engine room” to help FIs partner with their clients, industry leaders, and key buyers to develop practical and scalable solutions to these barriers.

Climate alignment represents a fundamental shift in the financial sector’s role in a changing climate, marked by increasing examples of financial institutions taking a more proactive and holistic approach to driving decarbonization across real-economy sectors.

The financial sector has already established climate-alignment efforts at the firm, sector, and system levels. Some examples:

• A wave of leading global banks have made commitments to reduce the carbon intensity of entire portfolios in line with net zero by 2050.
• RMI was centrally involved in the design and implementation of the Poseidon Principles: the world’s first climate-alignment agreement between 15 banks to align their collective $150 billion ship loan portfolios with a 2050 decarbonization trajectory. Similar efforts are under way across other high-emitting sectors
• Several frameworks such as the UN’s Net-Zero Asset Owner Alliance and Net-Zero Asset Managers Initiative have been established to reinforce efforts by coalitions of financial actors on climate alignment.

Climate alignment will require today’s carbon-intensive sectors to transition to net zero. Center-backed initiatives like the Mission Possible Partnership (MPP) empower corporates in heavy industry to play a leading role in solving the decarbonization puzzle through collective action. Collective action creates space for all relevant actors to agree on what needs to happen to decarbonize a given sector, and to take the necessary steps to make that shared vision a reality.

Although climate alignment implies a proactive role for FIs in supporting decarbonization, there is only so much the financial sector can do in the absence of policy. Climate policies and regulations that support the competitiveness of climate solutions will be critical for advancing climate efforts—both in the financial sector and beyond.

Financial regulation will also be key for shaping an operating environment that enables financial institutions to play a proactive role in the transition, such as by providing regulatory clarity around fiduciary duty and improving the availability of climate-related data through disclosures and standardization.

The Center helps FIs overcome barriers to climate alignment at the firm, sector, and system levels.

At the firm level, the Center supports individual FIs in making and implementing climate-alignment commitments through both targeted engagements and advisory projects, helping to dismantle unique barriers and promoting best practices.

At the sector level, the Center enables collective action with solutions ranging from targeted problem-solving efforts to wholesale sectoral climate-aligned finance agreements.

At the system level, the Center works primarily through engagement and facilitation, advisory positions, and thought leadership projects to shape the operating environment and address barriers common to all FIs, such as data availability, regulatory clarity, and integrating concepts of influence into alignment frameworks.

The Center is staffed by a diverse team of industry and finance experts from RMI who specialize in driving market-based solutions to climate change. The 20-member team is spread across London, Colorado, New York, and Washington, D.C.. RMI has more than 300 employees worldwide, with offices in the United States, India, and China. The Center is funded through philanthropic gifts from a range of donors.

The Center actively engages FIs across the investment chain. Our team of experts and deep partnership network are available to support our FI partners through various engagement opportunities. We invite you to connect with our Engagement Team to identify potential opportunities based on your firm’s strategic priorities.