Behind the Buzz of Paris Aligned Benchmarks
This article was written by Nadia Humphreys, Business Manager, Sustainable Finance Solutions at Bloomberg, Co-rapporteur on the Platform for Sustainable Finance of the European Commission.
Originally posted on bloomberg.com.
Paris Aligned Benchmarks (PAB) were first introduced in 2019 as tools to accompany the transition to a low carbon economy by the Technical Expert Group of the European Commission. They are a group of indices aiming to reallocate capital towards a low carbon and climate resilient global economy.
The benefit of these benchmarks is that they provide investors with an appropriate tool to measure the decarbonizing efforts of their investment strategy. For example, if a fund claims to reduce carbon to limit the rise in global temperatures to well below 2°C, then an asset owner would expect to see that fund benchmark itself to an appropriate decarbonizing index as a meaningful point of comparison.
In essence, PABs help to increase transparency on investors’ alignment with meeting the ambitious climate scenarios and the rate of decarbonization needed to stay in line with the Paris Agreement.
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