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Portfolio Alignment to a 2 oC Trajectory: Science or Art?

Julie RAYNAUD ** Experte indépendante en finance durable ; membre du réseau, Institut Louis Bachelier. Contact :
Peter TANKOV *** Professeur, CREST-ENSAE, Institut Polytechnique de Paris. Contact :
Stéphane VOISIN *** Responsable du programme « Finance verte et durable », Institut Louis Bachelier. Nous remercions Ian Cochran, Anuschka Hilke, Théo Le Guenedal, Alice Pauthier et David Zerbib pour leurs commentaires très pertinents relatifs à une version précédente de cet article.

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 methodology for 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, 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.

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