FinanceMap Banking Methodology
Analyzing banks on governance, financing, and policy engagement through a climate lensNovember 2023

Table of Contents
Introduction ..................................................................................................................... 2
Climate Governance, Strategy, and Policies....................................................................... 3
Benchmarks................................................................................................................................................ 3
Assessment Matrix ..................................................................................................................................... 6
Scoring ....................................................................................................................................................... 7

Financing Portfolios .......................................................................................................... 9
Exposure Metrics ........................................................................................................................................ 9
Portfolio Paris Alignment ......................................................................................................................... 10

Policy Engagement ......................................................................................................... 15

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Introduction
While there are efforts underway to codify climate-related issues into financial regulation, climate change
action within finance is currently largely focused on voluntary, non-binding initiatives. As a result, there is aneed from a range of stakeholders for an independent assessment of how the world's leading financial
institutions are performing on climate change.
FinanceMap provides research that looks at the financial sector through a climate lens with a primary focus on
asset managers and banks, comparing their top-lines commitments and targets to their actual climate-relevantbusiness activities. The objectives of this research are to (i) provide key stakeholders with insights into how thefinancial sector is performing on climate change, (ii) drive improvement within the sector itself by providing
benchmarking information, and (iii) increase the accountability of financial institutions for their climate-related
commitments and statements.
This document summarizes FinanceMap's methodology for assessing the performance of banks on climatechange. This assessment is largely divided into three streams: (i) assessment of climate governance, strategy,
and policies, (ii) financing portfolio analysis, and (iii) policy engagement scoring, each with its own metrics andmethods. The following sections expand upon each of these methodologies in depth.

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Climate Governance, Strategy, and Policies
Benchmarks
The TCFD Recommendations
The TCFD was established by the Financial Stability Board in 2015 to develop recommendations for more
effective climate-related disclosures. The TCFD’s Final Recommendations Report (2017) introduced 11
recommendations across four areas – Governance, Strategy, Risk Management, and Metrics and Targets. For
each recommendation, the TCFD included guidance for all sectors, and specific guidance and disclosure
recommendations for banking, asset owners, insurers, and asset managers.
The recommendations and guidance statements are used as a benchmark to assess the financial institutions'climate governance approaches using InfluenceMap’s matrix assessment approach (see section 3.1). For each
recommendation, the corresponding guidance statements were used to create a numerical five-point scaleranging from +2 to -2 which quantifies the financial institutions' disclosure alignment with each TCFD
recommendation. This allows FinanceMap to assess the alignment of the financial institutions' disclosures with
the TCFD guidance statements in depth.
In June 2021, the TCFD launched a public consultation on proposed changes to its guidance on Climate-related
Metrics, Targets, and Transition Plans, recognizing that data, methodology, and disclosure standards have
evolved since 2017. The vast majority of the proposed changes were formally integrated into the TCFD in
October 2021. Notably, the 2017 guidelines recommend companies “disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks” 1. However, the TCFD has“determined that data and methodologies have matured sufficiently such that Scope 3 disclosure isappropriate for all financial and non-financial sectors” 2 and recommends financial institutions disclose
financed emissions in line with the Partnership for Carbon Accounting Financials (PCAF), or a comparable
methodology 3.
Given the significance of financed emissions to the carbon footprint of a financial institution, FinanceMap haschosen to adopt the updated metrics and emissions disclosure elements (TCFD recommendations 9 and 10)
into the benchmark to ensure this assessment is in line with evolving industry standards.

1 TCFD, Proposed Guidance on Climate-related Metrics, Targets, and Transition Plans, June 2021, Pg 59
2 TCFD, Proposed Guidance on Climate-related Metrics, Targets, and Transition Plans, June 2021, Pg 34
3TCFD, Proposed Guidance on Climate-related Metrics, Targets, and Transition Plans, June 2021, Pg 65

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The October 2021 TCFD guidance update also included recommendations for financial institutions toincorporate transition plan disclosures into their disclosure around scenario analysis (TCFD recommendation
5). FinanceMap has not implemented this element of the new guidance into the scoring in order to allow FIs
time to update their reporting in line with these new reporting objectives. However, this will be integrated infuture iterations of this research. FinanceMap determined that many financial institutions discuss transition
plans when reporting on climate targets, which is assessed under TCFD recommendation 11.
Following the wave of net-zero announcements from financial institutions in 2020-2021, additional
benchmarks have been introduced to strengthen the ambition of the scoring criteria for the climate-target.
This analysis is supplemented with Net-Zero Banking Alliance Guidelines for target setting (TCFD
recommendation 11) to respond to this increased ambition in the sector. IPCC-aligned SBP benchmarks areused to ensure that the financial institutions' technology positions are aligned with the science on climatechange. Technology positions and exclusion criteria does not clearly fit into an existing TCFD recommendation,
therefore additional technology-specific queries were added to the assessment. This is fully described in
section 3.3.
In 2023, it was announced that the International Sustainability Standards Board (ISSB) would take over themonitoring of the progress of TCFD. In June 2023, ISSB issued inaugural standards IFRS S1 and IFRS S2 which
provides requirements for sustainability-related financial information disclosures and climate-related
disclosures. The requirements in IFRS S2 are consistent with the four core pillars and recommendations
published by the TCFD and is effective for annual reporting periods beginning on or after 1 January 2024.
FinanceMap will apply the additional requirements outlined in IFRS S2 to scoring benchmarks in 2024.

Net-Zero Alliances
The UN-convened Net-Zero Banking Alliance was launched in April 2021 with 43 founding banks, as thebanking arm of the UN Race to Zero campaign element of the Glasgow Financial Alliance for Net-Zero (GFANZ).
Other branches of this initiative relevant to this study include the UN-convened Net-Zero Asset Owner Alliance,
the Net Zero Asset Manager Initiative, and the UN-convened Net-Zero Insurance Alliance.
The Net-Zero Banking Alliance provides an internationally coherent framework and guidelines for which thetransition plans and the net-zero targets of banks can be benchmarked against. Signatory banks havecommitted to aligning their lending and investment portfolios with net-zero emissions by 2050 or sooner
pathways, and will set 2030 interim targets within 18 months that align with the UNEP Finance Initiative’s
Guidelines for Climate Target Setting for Banks.
Targets are assessed using a five-point scale for scoring which is described in section 3.4. In future iterations of
this research, financial institutions' climate targets will be assessed in detail in comparison to the targets andreporting criteria outlined by the Net-Zero Banking Alliance or equivalent GFANZ guidelines. This may continue
to be updated and strengthened in line with the most ambitious standards applicable to the industry.

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Science-Based Policy (SBP) Benchmarks
The 2018 IPCC Special Report on Global Warming of 1.5 °C advises on the need for “stringent and integrated
policy interventions” in order to achieve 1.5 °C mitigation pathways. The report provides detailed information
on various issues such as the energy mix, a price on carbon, required uptake of renewable energy and electricvehicles, and the viability of negative emission technologies such as carbon capture and storage.
In May 2021, the International Energy Agency (IEA) published its first Net Zero Emissions by 2050 aligned
scenario (NZE scenario), providing a clear roadmap to guide the energy sector, investor, and governments
towards limiting warming to 1.5 °C. Notably, it concluded that in order to achieve net zero emissions by 2050,
there can be no investment in new fossil fuel supply projects. In October 2021, the IEA released its annual
World Energy Outlook (WEO), which featured the NZE scenario as the normative scenario, further solidifying
the need for FI’s to tighten fossil fuel policies in order to have credible transition plans.
Technology specific benchmarks derived from these reports for coal, oil, gas, nuclear and renewables are usedin this assessment of FI’s Climate Governance, Strategy, and Policies to ensure that the financial institutions'
technology positions are aligned with the science on climate change. The application of these benchmarks
focuses on: (1) The financial institutions' internal policies on technologies relevant to the energy mix andenergy transition. (2) The financial institutions' engagement with broader climate and energy policy issues
such as advocacy on the role and importance of different energy types in the future energy mix. InfluenceMap
considers this form of corporate influencing to be systemically important in the broader process of setting
government policy priorities on climate and energy. Similarly, these benchmarks are applied to a five-point
scoring scale in the matrix assessment.
InfluenceMap recognizes that alongside calls to transition the energy mix, the IPCC 1.5 °C Special Reporthighlights the transitions in agriculture, forestry, and other land use required to meet 1.5 °C warming
pathways. InfluenceMap is expanding the SBP benchmarks to include these areas in future work.

EU Sustainable Taxonomy TEG Guidance
The European Commission appointed a technical expert group on sustainable finance (TEG) to assist it indeveloping the EU Sustainable Finance Action Plan. The EU Sustainable Taxonomy, a classification system todetermine whether an economic activity is environmentally sustainable as defined by the Paris Agreement, is a
key component of the Action Plan.
In March 2020, the TEG published a technical annex on the EU taxonomy outlining the financing guidelines
and screening criteria required for financing the transition of economies towards net-zero by 2050. The
guidelines outlined in the technical report are used alongside the IPCC SBP benchmarks to interpret FIs’
policies on the use of gas and carbon capture and storage in electricity production. Discussions surrounding
nuclear energy is assessed using the Taxonomy’s ‘Do No Significant Harm’ criteria.

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Assessment Matrix
The Climate Governance, Strategy, and Policies matrix scoring criteria is adapted from TCFD recommendations
and guidelines, Net-Zero Banking Alliance reporting, and IPCC and IEA technology statements. This assessment
is made up of sixteen queries, illustrated in Table 4. The weighting for each query was determined based on
engagement with TCFD experts and by weighting the relative importance placed on each technology in the
IPCC 1.5 °C Special Report.
TCFD Section

TCFD Recommendation

Matrix Query

Query
WeightingGovernanceR1: Describe the board’s oversight ofclimate-related risks and opportunities.

Q1: Does the board and /or board
committees consider climate-related risks
and opportunities in corporate strategy
and business planning?

1%

R2: Describe management’s role inassessing and managing climaterelated risks and opportunities.

Q2: Does the organization's management
play a role in managing climate-relatedrisks and opportunities?

4%

R3: Describe the climate-related risks
and opportunities the organization has
identified over the short, medium, andlong term.

Q3: Does the organization consider
climate-related risks and opportunities
over the different time horizons?

5%

R4: Describe the impact of climaterelated risks and opportunities on theorganization’s businesses, strategy, andfinancial planning.

Q4: Does the organization consider
climate-related risks and opportunities inbusiness, strategy, and financial planning?

5%

R5: Describe the resilience of theorganization’s strategy, taking into
consideration different climate-related
scenarios, including a 2°C or lower
scenario.

Q5: Does the organization test theresilience of its business strategy using
different climate-related scenarios?

5%

R6: Describe the organization’s
processes for identifying and assessing
climate-related risks.

Q6: Does the organization have processes
for identifying and assessing climaterelated risks?

4%

R7: Describe the organization’s
processes for managing climate-relatedrisks.

Q7: Does the organization have processes
for managing climate-related risks?

4%

R8: Describe how processes for
identifying, assessing, and managing
climate-related risks are integrated into
the organization’s overall risk
management.

Q8: Does the organization integrate its
processes for identifying, assessing, andmanaging climate-related risks into theiroverall risk management?

4%

Strategy

RiskManagement

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Metrics andTargets

SBP
Benchmarked
Technology
Positions

R9: Disclose the metrics used by theorganization to assess climate-relatedrisks and opportunities in line with its
strategy and risk management process.

Q9: Does the organization disclose themetrics used to assess climate-related risks
and opportunities in its strategy and risk
management process?

5%

R10: Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse gas(GHG) emissions, and the related risks.

Q10: Does the organization disclose
absolute Scope 1, Scope 2, and relevant
Scope 3 greenhouse gas (GHG) emissions,
including financed emissions data?

10%

R11: Describe the targets used by theorganization to manage climate-relatedrisks and opportunities andperformance against targets.

Q11: Do the organization’s climate-related
targets and associated actions align withleading practice standards?

15%

SBP Technology

Matrix Query

T1: Coal

Q12: Does the organization’s position on
the role for coal in the energy mix alignwith IPCC guidance?

13%

T2: Natural Gas

Q13: Does the organization’s position on
the role for natural gas in the energy mix
align with IPCC guidance?

10%

T3: Oil

Q14: Does the organization’s position on
the role for oil in the energy mix align with
IPCC guidance?

10%

T4: Nuclear

Q15: Does the organization’s position on
the role for nuclear in the energy mix alignwith IPCC guidance?

1%

T5: Renewables

Q16: Does the organization’s position on
the role for renewables in the energy mix
align with IPCC guidance?

4%

Table 2. The Climate Governance, Strategy and Policies matrix queries.

Scoring
The TCFD provide detailed guidance statements for each of the eleven recommendations which are broken
down into the four TCFD areas – Governance, Strategy, Risk Management, and Metrics and Targets. The
guidance statements for all sectors and specific guidance for the financial sector were used to create anumerical five-point scale ranging from + 2 to -2 for each recommendation. As referenced in section 3.2, theguidance for recommendation 11 around climate-related targets has been supplemented with the Net-Zero
Banking Alliance commitment and guidelines.
Table 5 illustrates how the five-point scoring system is derived from the TCFD guidance as a benchmark, withthis example showing the scoring criteria for query one.
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Benchmark

Score

Scoring Criteria

Recommendation: Describe the board’s
oversight of climate-related risks andopportunities.

+2

The organization has clearly described how the board and/or
board committees incorporate climate-related issues into
corporate strategy, decisions on major transactions, and its
risk management processes and policies+2

The organization has clearly described how the board and/or
board committees determine whether appropriate skills andcompetencies are available or will be developed to oversee
strategies designed to respond to climate-related risks andopportunities+2

The organization has clearly described how the board and/or
board committees directly oversee the setting of climaterelated goals and targets and the progress made against them+2

The organization clearly communicates the processes and thefrequency by which the board and/or board committees are
informed about climate-related risks and opportunities andhow this is integrated into wider corporate strategy
responses+1

The board and/or board committees incorporate climaterelated issues in guiding corporate strategy, decisions on
major transactions, and its risk management processes andpolicies. However, details on how it incorporates climate into
strategy and policies lack granularity+1

The board and/or board committees directly oversee thesetting of climate-related goals and targets and the progress
made against them, however, details on how it sets andmonitors these goals and targets lack granularity

0

The board appears to monitor and/or consider climaterelated issues to some extent but has not assigned clear
climate-related responsibilities to the board and/or board
committees-1

The board and/or board committees appear to consider
climate-related issues in an ad hoc manner, for example,
evidence is anecdotal and considerations appear to lackstructure or processes-2

The board and/or board committees do not appear toconsider climate-related issues in guiding corporate strategy,
business planning, or annual budgets

Guidance for All Sectors: In describing theboard’s oversight of climate-related issues,organizations should consider including a
discussion of the following:•••

Processes and frequency by which
the board and/or board
committees (e.g., audit, risk, orother committees) are informed
about climate-related issues,
Whether the board and/or board
committees consider climaterelated issues when reviewing andguiding strategy, major plans ofaction, risk management policies,
annual budgets, and business plans
as well as setting the organization’s
performance objectives,
monitoring implementation andperformance, and overseeing
major capital expenditures,acquisitions, and divestitures, andHow the board monitors andoversees progress against goals
and targets for addressing climaterelated issues.

(TCFD Knowledge Hub, Accessed October2021).

Table 3. The TCFD benchmark and scoring criteria for The Climate Governance, Strategy and Policies matrix
query 1.

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Financing Portfolios
FinanceMap’s assessment seeks to analyze the climate impact of financing flows facilitated by a given bank.
The activities analyzed under this research are corporate lending, and bond and equity underwriting (or,securities underwriting). Data on the deals facilitated by a bank in these financing categories is accessed
through Bloomberg. The Bloomberg Terminal LEAG function is used to generate the full global deal portfolios
for each of these categories for each financial institution analyzed. The LEAG tables contain data on publicly
disclosed loan, bond, and equity deals, as well as on deals for which data was disclosed directly to Bloomberg.
FinanceMap uses two primary types of metrics to analyze each of the aforementioned financing streams:(i) exposure metrics, and (ii) portfolio Paris alignment scores.

Exposure Metrics
FinanceMap analyzes the exposure of portfolios to (i) fossil fuel value chain companies, and (ii) companies
which are primarily active in transitional activities, or “green” companies. Exposure metrics are calculated bothin absolute value and as a percentage of the portfolio’s total value. The following sections explain how
FinanceMap identifies fossil fuel and green companies respectively.

Fossil Fuel Exposure
FinanceMap calculates a portfolio’s fossil fuel exposure by flagging all companies in a portfolio which areprimarily active in fossil fuel production value chains based on their BICS, GICS, and NAICS sector
classifications. The fossil fuel production value chain is defined as the universe of companies of which theprimary sector of operations is in or uniquely related to the up-, mid-, and/or downstream segments of oil andgas production or the coal mining sector. This includes companies of which the primary operations are services
specific to these sectors (e.g. exploration, surveying, pipeline infrastructure, etc.).

Green Exposure
FinanceMap defines green companies on the basis of the EU taxonomy for sustainable activities (abbr. “EUtaxonomy”). Specifically, all companies with over 75% of revenue deriving from activities which demonstrate
substantial contribution to climate change mitigation under the EU taxonomy are considered “green” under
this methodology.
FinanceMap gathers data on companies’ percentage of revenue contributing to climate mitigation from
Bloomberg. Specifically, Bloomberg Terminal provides data for the “estimated revenue demonstrating
substantial contribution to climate change mitigation” under the EU taxonomy. FinanceMap supplements thiswith Bloomberg data on companies’ revenue in BICS sectors which are classified as having substantial
contribution to climate mitigation with no criteria (e.g. solar or wind power generation, production of zero-

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emissions vehicles, power storage, etc.) All companies with over 75% revenue in either the former or the sumof the latter are considered “green”.

Portfolio Paris Alignment
The other primary metric FinanceMap uses to analyze portfolios is the Portfolio Paris Alignment (PA) Score.
This metric uses the industry-standard Paris Agreement Capital Transition Assessment (PACTA) tool, an opensource methodology managed by RMI and expanded upon by FinanceMap, to measure the alignment of aportfolio of companies with the IEA Net Zero Emissions by 2050 Scenario (NZE). For an in-depth elaboration of
the PACTA methodology, please refer to RMI’s PACTA documentation. A condensed explanation is given below,
followed by the full methodology behind FinanceMap’s use of the PACTA outputs to calculate the Portfolio
Paris Alignment Score.

PACTA
PACTA is an open-source portfolio alignment methodology developed by 2DII, which calculates the forwardlooking alignment of a portfolio of companies with science-based climate scenarios. To do so, PACTA uses
physical asset-based data, created by Asset Impact, to estimate the total future production of real-economy
companies in climate-relevant sectors. The dataset used contains forward-looking production data for
approximately 35,000 publicly and privately owned real-economy organizations across climate-relevant
sectors. Comparison of this real-economy production data against prescriptions by Paris-aligned climate
scenarios allows for the calculation of the Paris Alignment of companies and portfolios. FinanceMap uses the
IEA Net Zero Emissions by 2050 Scenario (NZE) in its application of PACTA.
Currently, FinanceMap uses PACTA analysis for four climate-relevant sectors: automotive, upstream oil and gas
production, coal mining, and electric power. The Asset Impact forward-looking production data at company
level is split into different 'technologies', i.e., types of output, within these sectors. For a specific real-economy
company, the data forecasts the number of units which the company will produce in each technology in eachyear. The following table shows the different production technologies analyzed within each sector.

Sector

Unit of Production

Technology

Automotive

Light-duty vehicles per year

Electric
HybridInternal Combustion Engine (ICE)

Coal Mining

Tonnes of coal mined per year

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Oil & Gas

Barrels of oil equivalent (BOE)

Production

extracted per year

Electric Power

MW installed capacity

Oil
Gas
Coal-fired
Gas-firedHydropower
NuclearOil-fired
Renewables

Table 7. PACTA production technologies by sector.
The IEA NZE, meanwhile, sets out a pathway with a 50% chance of limiting global warming to 1.5° C by 2100.
This pathway consists of roadmaps for the different sectors, prescribing production targets for the different
technologies within a sector for every year between now and 2050. PACTA translates these sector-level targets
to company-specific targets, allowing the calculation of the gap between a company’s actual forecasted
operations and its target under the Paris-aligned NZE.
The following section explains how PACTA calculates technology-level Paris Alignment scores for a portfolio
based on the forward-looking data of its portfolio companies. Subsequently, top-line Paris Alignment scores
are calculated by FinanceMap at the sector and the overall portfolio level.

Technology Paris Alignment Scores
To calculate the Paris Alignment of a portfolio for a certain technology within a given sector, PACTA firstallocates the real-economy activities of the portfolio’s constituent companies to the overall portfolio. For
banking activities, PACTA allocates the production of the company using a portfolio-weighted approach.
Specifically, the portfolio weight for a company is calculated by dividing the sum of the value of deals with thiscompany by the sum of all deals within the same sector. A company’s total production within a technology ismultiplied by this portfolio weight to obtain the company’s production amount allocated to the bank. For
example, if a loan to Coal Company A represents 10% of a bank’s coal loan portfolio, 10% of Coal Company A’s
production is allocated to the bank’s loan portfolio..
By summing the allocated production over all the companies in a portfolio, the methodology obtains theportfolio’s allocated forward-looking production in each technology in each sector. The same allocation andsumming process is applied to the companies’ NZE targets, giving a Paris-aligned target for the portfolio in

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each technology. Calculating the relative difference between the portfolio’s allocated production in atechnology and the portfolio’s NZE target over a five-year timeframe gives the Paris Alignment score at
technology level. Note that the score is calculated such that overshooting the target gives a positive score forgreen technologies but a negative score for polluting technologies.
Thus, for a green technology 𝑖𝑖,
𝐴𝐴𝑡𝑡𝑡𝑡𝑡𝑡ℎ=𝑖𝑖
and for a polluting technology 𝑗𝑗,

𝑡𝑡𝑡𝑡𝑡𝑡ℎ,𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝
5∑𝑡𝑡𝑡𝑡=𝑡𝑡
𝑃𝑃
1 𝑡𝑡∑5𝑡𝑡=𝑡𝑡1 𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡ℎ,𝑁𝑁𝑁𝑁𝑁𝑁

𝐴𝐴𝑗𝑗𝑡𝑡𝑡𝑡𝑡𝑡ℎ = (−1) ∗ �−1

𝑡𝑡𝑡𝑡𝑡𝑡ℎ,𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝
5∑𝑡𝑡𝑡𝑡=𝑡𝑡
𝑃𝑃
1 𝑡𝑡
5∑𝑡𝑡𝑡𝑡=𝑡𝑡
𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡ℎ,𝑁𝑁𝑁𝑁𝑁𝑁
1 𝑡𝑡

− 1�
𝑡𝑡𝑡𝑡𝑡𝑡ℎ,𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝

Where 𝐴𝐴𝑡𝑡𝑡𝑡𝑡𝑡ℎ
is the Technology Paris Alignment Score for technology 𝑖𝑖, 𝑃𝑃𝑡𝑡𝑖𝑖

is the portfolio’s

allocated production in the technology in year 𝑡𝑡, and 𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡ℎ,𝑁𝑁𝑁𝑁𝑁𝑁 is the portfolio’s IEA NZE target for thetechnology in the same year 𝑡𝑡. The production and corresponding NZE targets are respectively summed overthe 5-year timeframe assessed (𝑡𝑡1 to 𝑡𝑡5 ). As of December 2023, 𝑡𝑡1 is 2023 and 𝑡𝑡5 is 2027.

In this scoring method, a 0% alignment score indicates that the portfolio is aligned with the NZE. In this case,the portfolio (in allocated aggregate) owns assets which are forecast to produce an amount equal to the NZE
scenario-aligned production for those assets over the next five years. A negative score indicates that theportfolio owns too much polluting or too little green production compared to the NZE. A positive score showsthat the portfolio owns less polluting or more green production than the NZE prescribes.
Technology Paris Alignment scores are artificially capped at +100% and -100%, in order to avoid imbalance
between the possible range of positive and negative PA scores. For example, for green technologies, a
portfolio which owns zero actual production but has a non-zero scenario target would receive a scoreof -100%. However, very high numbers for actual green production with very low scenario targets could
technically lead to infinitely high PA scores. The opposite is true for polluting technologies, where portfolios
could have infinite negative alignment while being limited to +100% positive alignment.

Sector Paris Alignment Scores
To arrive at the Sector-level PA score, the PA scores for each technology within a sector are combined using aweighted average approach. The weighting used is a product of two factors:■

Portfolio technology share (𝑊𝑊𝑖𝑖𝑇𝑇𝑇𝑇 ): This weighting is calculated by finding the fraction of production eachtechnology has within its sector in the portfolio aggregate in 5 years' time. This is used to gauge thetechnologies’ relative importance in the companies held by the portfolio.

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■Technology production change in NZE (𝑊𝑊𝑖𝑖𝑇𝑇𝑇𝑇 ): Within a sector, each technology makes a different relative

contribution to global emissions. Consequently, the use of some technologies (e.g., coal-fired power andrenewable energy) is more significant than others (e.g., oil-fired power) for meeting the NZE pathway. To
reflect this, polluting technologies are weighted based on their production in 2020 in the NZE, as theymust scale down from this amount. Meanwhile green technologies are weighted based on their target
production in 2030 in the NZE, as they must build up to this amount. The result is that in addition toweighting the individual technology alignments based on portfolio exposure, the Sector Paris Alignment
Score also accurately captures the variable importance of different technologies to the global energy
transition.
Thus, the Sector Paris Alignment Score 𝐴𝐴𝑘𝑘𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 for sector 𝑘𝑘 is calculated as
𝐴𝐴𝑘𝑘𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 =∑𝑖𝑖 𝑊𝑊𝑖𝑖𝑇𝑇𝑇𝑇 ∙ 𝑊𝑊𝑖𝑖𝑇𝑇𝑇𝑇 ∙ 𝐴𝐴𝑡𝑡𝑡𝑡𝑡𝑡ℎ𝑖𝑖∑𝑗𝑗 𝑊𝑊𝑗𝑗𝑇𝑇𝑇𝑇 ∙ 𝑊𝑊𝑗𝑗𝑇𝑇𝑇𝑇with 𝑖𝑖 and 𝑗𝑗 indices for technologies within the given sector 𝑘𝑘 and the other variables defined as in the

aforementioned.

Portfolio Paris Alignment Scores
The calculation of the overall Portfolio Paris Alignment score from the Sector Paris Alignment scores closely
mirrors that of the Technology to Sector Paris Alignment calculation. The Portfolio PA score is a weighted
average of the Sector PA scores, with weightings reflecting portfolio value exposed to a given sector and thesector’s importance to the emissions transition. This represents a minor variation on the calculation used toaggregate to the sector level. The two factors in each weighting are:■Financial exposure to sector (𝑊𝑊𝑗𝑗𝑆𝑆𝑆𝑆 ): Unlike weighting different technologies within a sector, between

sectors there are entirely different production types (e.g., MW of capacity, tonnes of coal produced),which renders a weighting based on absolute production meaningless. As a proxy, the relative portfolio
value exposed to that sector is used. Note that in this calculation only those companies for which thesector at hand is the company’s primary sector of operations are counted, to avoid double-counting, as
well as to prevent highly valuable companies with negligible production in a sector from skewing theweighting (e.g., Apple and Amazon have very small holdings in power generation assets).

■

Sector emissions change in NZE (𝑊𝑊𝑗𝑗𝑆𝑆𝑆𝑆 ): Like the explanation above for technologies, different sectors willneed to make different relative contributions to global emissions or emissions reductions over the coming
decades. To reflect this, each sector is weighted based on the extent to which its emissions must change
between 2020 and 2030 as outlined in the NZE.
Thus, the Portfolio Paris Alignment Score 𝐴𝐴𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 is calculated as

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𝐴𝐴𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 =∑𝑘𝑘 𝑊𝑊𝑘𝑘𝑆𝑆𝑆𝑆 ∙ 𝑊𝑊𝑘𝑘𝑆𝑆𝑆𝑆 ∙ 𝐴𝐴𝑘𝑘𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠∑𝑙𝑙 𝑊𝑊𝑙𝑙 𝑆𝑆𝑆𝑆 ∙ 𝑊𝑊𝑙𝑙 𝑆𝑆𝑆𝑆

with 𝑘𝑘 and 𝑙𝑙 sector indices and the other variables defined as in the aforementioned.

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Policy Engagement
To assess financial institutions’ engagement with sustainable finance policy processes, InfluenceMap applies
the existing LobbyMap methodology for assessing climate policy engagement. Please refer to the LobbyMap
Methodology for an in-depth explanation of this assessment.

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