From Aligning with Paris to the Sdgs

CLIMATE BRIEF N°64 From Aligning with Paris to the SDGs

Paris, November 2020 Authors: Alice Pauthier | Ian Cochran

KEY MESSAGES Climate Action and Sustainable

• It is crucial to connect the dots Development are two parts of the same between the climate and the challenge and must be addressed together sustainable development community and discuss how both climate and Both adopted in 2015, the Paris Agreement and the 2030 Agenda sustainable development alignment for Sustainable Development frame a set of global objectives that approaches are to be integrated. are deeply connected. The 2030 Agenda for Sustainable Development • I4CE’s ‘Paris Alignment’ framework adopted three months before COP21 provides a global framework for international action on Sustainable Development, relying on 17 Sustainable can provide key insights for the Development Goals (SDGs), developed to be “integrated and indivisible development of frameworks to align and balance the three dimensions of sustainable development: the with the 2030 Agenda for Sustainable economic, social and environment” (United Nations 2015). In turn, the Development: Alignment requires Paris Agreement set shared international objectives for climate action that both public and private actors embedded in the broader 2030 Agenda for Sustainable Development. look across three dimensions to assess whether their strategies and While all of the SDGs need to be addressed altogether, due to the operations are both consistent with scale of climate change risks and of the transformations needed, and best contribute to climate and climate change action has been identified as the most urgent.Taking action on climate change is just one of the 17 SDGs; however its urgency sustainability goals: is recognized in the SDG 13 as countries have committed to “take urgent - A Comprehensive Scope of Action, action to combat climate change and its impacts” (United Nations 2015). - A Long-Term Time Horizon to Guide The United Nations reconfirmed in the 2019 Sustainable Development Impact, Goals Report that the most urgent area for action today is climate change - An Ambitious Scale of Contribution. (United Nations 2019). Nevertheless, climate and sustainability should be • Alignment approaches should rely advanced together given that the significant changes needed in national on ambitious national pathways or economies and societies to achieve climate objectives will depend on the ‘visions’ of how long-term climate achievement of the other 16 SDGs. and sustainability goals could be met The framework I4CE has developed on Paris Alignment can provide nationally and internationally. How- key insights for the development of frameworks for alignment with ever, in practice national pathways the SDGs as a whole. Since 2015, discussions on the ‘alignment’ either are still insufficiently operationalizable with the Paris Agreement or the SDGs have arisen with a need to develop and there is an urgent need to develop robust frameworks that can support institutions in aligning themselves them. with these objectives from strategies to operations. In 2019, I4CE as part of a joint project with the Climate Policy Initiative (CPI) and supported • To overcome the inherent complexity by the International Development Finance Club (IDFC) and the European of addressing both climate change Climate Foundation (ECF) produced a framework for all economic actors and other SDGs simultaneously, to align activities with the Paris Agreement objectives.1 While focusing the approach proposed by the 2019 Global Sustainable Development 1. Mandated by the International Development Finance Club (IDFC) and the European Climate Report appears to be a step forward Foundation (ECF), Climate Policy Initiative (CPI) and the Institute for Climate Economics to guide the development of align- (I4CE) have conducted a research project in two parts, resulting in: a Discussion Paper ment methodologies. (Part 1) produced by I4CE that establishes a theoretical and conceptual basis for alignment; and an application to IDFC Members (Part 2) produced by CPI that identifies the changes the Paris Agreement implies for the role of development finance institutions.https://www. i4ce.org/download/framework-alignment-with-paris-agreement-why-what-and-how-for- financial-institutions/

Climate Brief n°64 - From Aligning with Paris to the SDGs – I4CE | 1 principally on climate-related aspects, this framework was This document is intended to serve as a basis for exchange developed to be compatible with sustainable development between financial institutions’ practitioners and the think objectives given that Article 2 of the Paris Agreement places tank and research community who have started to develop climate action in the broader context of the Sustainable and sometimes implement alignment approaches with either Development agenda. climate or sustainable development objectives, or both. This Climate Brief discusses how I4CE’s Framework It aims to connect the dots between the climate and the for Alignment with the Paris Agreement could be used sustainable development community and discuss how to as a basis for broader SDGs alignment frameworks. connect – if not unify – alignment approaches.

Alignment must include three core dimensions whether with climate or sustainable development goals

Both the Paris Agreement and the SDGs have reframed The three core dimensions of the “alignment” framework global action on climate and sustainability from a focus developed by I4CE – namely a Comprehensive Scope, on the near-term incremental increase in sustainability A Long-Term Time Horizon, and an Ambitious Scale of outcomes, to the long-term transformation of economies Contribution – are pertinent for both climate and the and societies. In the case of climate change, this means broader SDGs. These three dimensions aim to ensure that ensuring that incremental adaptation and mitigation actions all activities are covered and that whenever possible an contribute to the long-term decarbonization and adaptation institution fosters the deep transformation of systems and pathway defined by national economies. The SDGs have also value chains at both the country and global levels. In addition, reframed action around the transformation of economies and societies needed to achieve a better and more the framework relies on the assumption that to successfully sustainable future for all. While the timeframe for climate align with the Paris Agreement, financial institutions must also and sustainability goals are not the same, all emphasize on address the broader sustainable development challenges. the significant transformations of economies and societies needed to frame, in turn, near-term milestones.

FIGURE 1. THE PARIS ALIGNMENT BULLS EYE: A FRAMEWORK TO GUIDE AMBITIOUS ALIGNMENT WITH THE PARIS AGREEMENT A Comprehensive Scope of Action: screen all activities for contribution to low-GHG climate-resilient development Directly or indirectly support activities consistent with low-GHG climate-resilient development across all business areas. Take into account impacts and inﬂuence on systems and the entire value chains, both at national and global levels.

A Long-Term Time Horizon to Guide Impact: ensure that near-term actions contribute to the achievement of long-term goals Prioritize actions that are consistent with both near- and long-term climate objectives and do not lead to lock-in or mal-adaptation. Recognize that ‘relative’ reductions in emissions or increases in resilience may be counterproductive to achieving long-term goals.

An Ambitious Scale of Contribution: actively support national and international transformations across all activities Halt support for non-consistent activities and seek whenever possible to contribute to both the incremental and transformative changes needed to support national and global sustainable long-term low-GHG climate-resilient development.

Low-GHG Development: Scale-down and stop non-consistent operations. Avoid locking-in emissions. Adaptation: Avoid decreasing resilience, increasing vulnerability, DO NO HARM and contributing to maladaptation. Financial Flows: Stop support of non-consistent ﬂows whether direct or through intermediation.

Low-GHG Development: Contribute to the decarbonization of the entire SUPPORT PARIS economy and society. CONSISTENT CLIMATE Adaptation: Contribute to increasing adaptation, resilience and adaptive CO-BENEFITS capacity of investments. Financial Flows: Foster contributions of own ﬂows and those of partners.

Low-GHG Development: Facilitate the transformation to low-GHG FOSTER systems and value chains. TRANSFORMATIVE Adaptation: Facilitate and reduce the cost of adaptation actions OUTCOMES to long-term climate change. Financial Flows: Support the ‘consistency’ of the broader ﬁnancial system (regulation, norms, transparency).

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Source: I4CE 2019.

2 | I4CE – Climate Brief n°64 - November 2020 The following sections present the three dimensions of the Adopting a long-term focus is also necessary to align framework as applied to climate change, identifying aspects with the broader SDGs. While the Agenda for Sustainable that can also be useful for SDGs alignment. Development has set 2030 as a target, the need has been recognized to go beyond 2030 and adopt a long-term time A Comprehensive Scope of Action horizon to align with sustainable development objectives. As part of alignment approaches, actors should seek to The 2019 Global Sustainable Development Report highlighted directly or indirectly support the transition and adaptation that the risks of being guided only by short to medium-term of economies and societies across all business areas – time horizons can be extended to all environmental aspects and take into account the impact of their activities on of sustainable development (‘The Future Is Now: Science for the transition of broader systems and value chains. In the Achieving Sustainable Development’ 2019). case of climate change, this implies an assessment of the In multidimensional frameworks such as the SDGs, there consistency with low-GHG climate-resilient development of is a strong need to take into consideration the risks to all of an actor’s activities. This goes beyond measuring how the long-term achievement of all goals due to delayed an investment supports a specific objective, such as the action on a subset – and prioritize action accordingly. The reduction of GHG emissions, to also look at how specific increasing urgency noted on climate change is one example actions support changes within the strategy of counterparties where delayed action or action to achieve SDGs that would or affect entire value chains. not take into account climate change may imperil the The Paris Agreement incites actors to act in a manner achievement of the SDGs as a whole. The Intergovernmental consistent with the long-term goals of the Agreement Panel on Climate Change (IPCC) noted that sustainable itself as well as the Sustainable Development Agenda. development alignment assessment frameworks should take Doing this in practice requires a comprehensive approach into consideration the fact that delaying action – especially that seeks to measure and assess the direct and indirect on climate and other environmental issues - may not be impact of each activity vis-a-vis the deep transformation of cost-effective and may generate a number of other risks systems and value chains across all aspects of sustainable (IPCC 2018). development. Assessing the impact of each activity against individual climate metrics – or each individual SDGs one by An Ambitious Scale of Contribution one – may appear as the best approach. However, in practice For all actors, being aligned with climate or sustainable this quickly reveals itself as unwieldly. Furthermore, it misses development objectives means that they understand the fact that achieving the SGDs requires addressing them how they can contribute to the transformations of simultaneously, taking advantage of positive synergies economies and societies that are needed to achieve while resolving the negative trade-offs as discussed by the them. The scale of contribution may vary from one institution UN’s 2019 report ‘The Future Is Now: Science for Achieving to another as they may be involved in different types of Sustainable Development’. activities with varying levels of focus on impact-oriented While a comprehensive approach across all SDGs objectives depending on their mandate, strategic priorities is increasingly seen as necessary, it may be seen by and risk appetite. Nevertheless, the 2019 Global Sustainable many as overly complicated to achieve in practice. A Development Report highlighted that “the need is critical, promising development to support ‘comprehensive’ action and action must be bold and decisive, not just for change lies, however, in the recommendations of the 2019 Global but for systemic transformation” (United Nations 2019, 20). Sustainable Development Report to focus efforts on the As such, actors of all types should aim to scale-down and transformation of systems rather than individual or clusters of halt activities inconsistent with climate and sustainable SGDs. It identifies six entry points to the deep transformation development objectives and maximize their direct and towards sustainable development, which might constitute an indirect impact, within the limits of their mandates interesting basis in the development of activities assessment and business models. Taking into account the first two frameworks (‘The Future Is Now: Science for Achieving dimensions, actors should seek to develop the internal Sustainable Development’ 2019).2 processes that will help them prioritize actions and activities that will be the most transformational possible: A Long-Term Time Horizon to Guide Impact • First, by ensuring that all activities “Do No Harm”. I4CE’s framework demonstrates that alignment Actors should be able to identify and act on all activities approaches should prioritize actions that are consistent that hinder or are counterproductive to the achievement with both near-term and long-term goals to avoid the of climate or sustainable development objectives or lock-in of non-consistent outcomes. In the case of Paris inconsistent with long-term national sustainable and low- Alignment, it is essential to recognize that activities that GHG, climate-resilient development pathways. result in ‘relative’ rather than ‘absolute’ GHG emissions • Second, by supporting activities that significantly reductions or enhanced resilience that are not sufficiently contribute to climate or other sustainable development ambitious may be counterproductive to achieving long-term objectives. Whenever possible, actors should prioritize climate goals. activities with direct or indirect co-benefits for climate or other sustainable development objectives that are

2. 1) Human well-being and capabilities; 2) Sustainable and just economies; 3) Food systems and nutrition patterns; 4) Energy decarbonization with universal access; 5) Urban and peri-urban development; 6) Global environmental commons.

Climate Brief n°64 - From Aligning with Paris to the SDGs – I4CE | 3 consistent with national pathways and do not undermine ‘transformative outcomes’ that reduce the barriers to and the achievement of other SDGs. support the large-scale, systemic and structural changes • Third, by fostering transformative outcomes. needed for the transition of economic, social and natural Whenever possible, actors should prioritize activities with systems across and within national economies.

An Urgent Need for Alignment: robust national pathways for both long-term international climate and sustainable development objectives

Robust pathways are essential parts of approaches to An essential next step is ensuring the availability and align with both climate and sustainable development robustness of these national pathways at the level goals. The Paris Agreement, the Sustainable Development of granularity and ambition needed. Today, calls for Agenda and both the research and operational literature integrated pathways and scenarios are omnipresent parts increasingly refer to ‘paths’ or ‘pathways’ of national and of both climate and SDG alignment discussions. The international economies to achieve long-term goals. These climate and sustainable development research community pathways to be defined by countries through long-term have noted the need for the development of integrated strategies and short- to medium-term national plans should socio-economic pathways to achieve both climate and provide to economic actors the information they need to sustainable development objectives. For example, the IPCC understand how countries envision over time and are highlighted in its 1.5 Special Report, that no pathway in the currently planning the transformation of their economy to literature integrates or achieves all 17 SDGs and called for meet long-term sustainable development objectives. narratives of sustainable socio-economic pathways, not only Both long-term strategies and short- to medium-term describing a low-carbon socio-economic pathway that is national plans need to be developed in a manner that adapted to climate change, but also, more generally, meeting integrates both climate and sustainable development the 17 Sustainable Development Goals (SDGs) (Hoegh- objectives. Furthermore, these plans should be 1) readily and Guldberg et al. 2018). In turn, the 2019 Global Sustainable publicly available, 2) sufficiently detailed and 3) ambitious to Development Report called for every country and region be pertinent for informing decision-making. However, it is to “design and rapidly implement integrated pathways to widely recognized that at the global level, current nationally- sustainable development that correspond to their specific focused plans do not meet these three criteria and often are needs and priorities, and contribute also to the necessary not readily available (UNFCCC 2019). In the case of climate global transformation.” change, for example, near-term national climate plans represented in current Nationally Determined Contributions (NDCs) are clearly insufficient.

 Moving forward, I4CE would welcome responses and case studies from both financial institutions’ practitioners and the think tank and research community to confirm or contest the above assumptions. We believe it is crucial to connect the dots between the climate and the sustainable development community and discuss how both alignment approaches are to be integrated. 

Bibliography

Hoegh-Guldberg, Ove, Daniela Jacob, Michael Taylor, Marco Bindi, United Nations, ‘The Future Is Now: Science for Achieving Sustainable Sally Brown, Ines Camilloni, Arona Diedhiou, et al. 2018. ‘Impacts Development’. 2019. https://sustainabledevelopment.un.org/ of 1.5°C of Global Warming on Natural and Human Systems. content/documents/24797GSDR_report_2019.pdf. In: Global Warming of 1.5°C. An IPCC Special Report on the United Nations. 2015. ‘Transforming Our World: The 2030 Agenda Impacts of Global Warming of 1.5°C above Pre-Industrial Levels for Sustainable Development.’ https://sustainabledevelopment. (3338) and Related Global Greenhouse Gas Emission Pathways, in the un.org/content/documents/21252030%20Agenda%20for%20 Context of Strengthening the Global Response to the Threat Sustainable%20Development%20web.pdf. of Climate Change, Sustainable Development, and Efforts to United Nations. 2019. ‘The Sustainable Development Goals Eradicate Poverty’. IPCC. https://www.ipcc.ch/site/assets/ SophieBerlioz.fr Report 2019’. 2019. https://unstats.un.org/sdgs/report/2019/ uploads/sites/2/2019/05/SR15_Chapter3_Low_Res.pdf. The-Sustainable-Development-Goals-Report-2019.pdf. : Création-réalisation

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