IDEAS home Printed from https://ideas.repec.org/p/dnb/dnbwpp/833.html
   My bibliography  Save this paper

Toward Paris-Aligned Sovereign Investment Portfolios: Utilizing Implied Temperature Rise as a Measure of Alignment

Author

Listed:
  • Dylan Dunlop-Barrett

Abstract

Investors are increasingly adopting Paris-aligned strategies to better manage climate risks and opportunities. Despite sovereign debt investments making up approximately half of global bond markets, frameworks for assessing Paris-alignment for sovereign portfolios are still in their infancy. This paper firstly advocates for Implied Temperature Rise (ITR) as a metric which investors can use to assess portfolio Paris-alignment, and to capture the embedded transition risks in current sovereign holding. It then proposes a new ITR methodology, further refining existing methodologies. This methodology differs from existing methodologies in that is does not rely on benchmark emission pathways, which we believe yields less volatile and more accurate results. Furthermore, the methodology can more easily include updated global temperature data, and takes a consumption based approach to emissions. Finally, the paper provides a worked example of the methodology, utilizing a hypothetical sovereign portfolio.

Suggested Citation

  • Dylan Dunlop-Barrett, 2025. "Toward Paris-Aligned Sovereign Investment Portfolios: Utilizing Implied Temperature Rise as a Measure of Alignment," Working Papers 833, DNB.
  • Handle: RePEc:dnb:dnbwpp:833
    as

    Download full text from publisher

    File URL: https://www.dnb.nl/media/55lp4g5e/working_paper_no-833.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    responsible investment; Paris-alignment; sovereign investments; implied temperature rise;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:833. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: DNB (email available below). General contact details of provider: https://edirc.repec.org/data/dnbgvnl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.