Climate Impact Measurement In Climate Finance and Carbon Markets

Abstract

Skepticism over aspects of the carbon markets has the potential to infect perceptions of initiatives seeking to engage the private sector in the gargantuan task of financing the transition to a low-carbon global economy. Climate finance, working in tandem with climate markets, is at the core of the Paris Agreement and the financial flows required to give adequate effect to its implementation cannot happen without the commitment of private finance and the private sector being fully engaged. For this to occur, there must be confidence in the design, operation, and governance of markets; and in relation to mitigation, in the validity and environmental integrity of measurable outcomes. The field of climate data analysis is developing to service the demands of the financial sector, driven in part by anticipated regulatory and disclosure requirements. Yet an examination of the current analytical approaches points to an emphasis on the consequences for corporations, investments, assets, and infrastructure from climate-related risk, as opposed to the consequences for the climate of corporate activities, investments, asset or infrastructure development. While both approaches are legitimate subjects for analysis, the paper argues that this risk bifurcation can and should be addressed to ensure the raison d’être of climate finance and climate markets – transition to a low-carbon economy and the mitigation objectives of global climate policy – is given due weight, through the development of accurate, reliable, comparable metrics that provide clear yardsticks on how climate finance investments are contributing to progress towards the goals of the Paris Agreement.