Impact initiative of the year - Global: Portfolio Alignment Team paper on 'Measuring Portfolio Alignment'

The Portfolio Alignment Team (PAT) is a collaborative initiative of nine financial institutions aiming to bring convergence and transparency to measuring portfolio alignment with the objectives of the Paris Agreement.David Blood

There is currently a plethora of portfolio alignment metrics, with varying and evolving methodologies, and sometimes opaque assumptions being used PAT has created a framework for the construction of portfolio alignment metrics so there is comparability, transparency and consistency in measuring institutions and companies' efforts towards net-zero emissions.

This will have the benefit of making it easier to identify sectors leaders and laggards across geographies, and allocate capital accordingly, according to PAT.

The Taskforce for Climate-related Financial Disclosures (TCFD), the reference body for climate-related disclosures, now backs this framework. The importance of this work is underlined by recent G7 support for mandatory TCFD disclosures, the team argues.

"Our framework aims to demystify and improve portfolio alignment tools so that net-zero alignment means the same thing for companies, financial institutions, and the wider public. We want end-users to be able to trust that such metrics reflect real-world action," said David Blood, head of PAT and senior partner at Generation Investment Management.

The recommendations on portfolio alignment are expected to be finalised by October this year, ahead of COP26.

One Impact Awards judge noted that PAT "addresses a critical problem with a tangible solution, is focused on the current period and evolving efforts for net-zero alignment, and overall, it is very thoughtful and practical".

Key points about PAT that stood out for the judges:

  • It's a collaborative initiative between nine different institutions.
  • A TCFD-aligned framework for best practise in the construction of portfolio alignment metrics.
  • It helps produce transparent, more standardised, more comparable, and therefore more useful, portfolio alignment metrics.
  • These tools will also help financial institutions to report and demonstrate their net-zero efforts to the wider society.
  • The PAT team has engaged with 11 of the world's foremost portfolio alignment method providers, in addition to multiple expert academics and practitioners.