18.10.2022 ・ CLIMATE IMPACT ANALYSIS FOR BANKS

Measuring Paris-Alignment Across Asset Classes GLS Bank

Reference

**Dr. Laura Mervelskemper**Co-Leiterin "Wirkungstransparenz und Nachhaltigkeit"

Climate fund below 2°C

In 2019, GLS Bank started a climate impact analysis of its climate fund using the XDC Model. Some of the main challenges were:

The coverage of different asset classes,
data availability and
a customized sector classification.

Through intensive collaboration between GLS Bank, Wuppertal Institute and right°, the various challenges were addressed, and the climate impact analysis of the fund was successfully completed.

The result: the fund is demonstrably <2°C-compatible. The bank can communicate the Paris Alignment of the fund to customers and stakeholders.

Consistent Communication

After successfully piloting a Temperature Alignment approach in portfolio management, GLS Bank also extended the XDC analysis to include:

its credit portfolio,
customer portfolios, and
the bank itself.

This methodologically consistent application of Temperature Alignment to all asset classes and areas is the key to consolidated customer communication and transparent reporting.

"Capital flows play a central role in relation to the climate crisis. XDC can help align them to 1.5°C."

GLS Bank cargo bike. Photo: Patrick Held

Strategic Partnership

Within the framework of a strategic partnership, right° and GLS Bank are working on the continuous improvement of the methodological basis of the XDC analysis. The main topics are:

full integration of Temperature Alignment into the portfolio management process,
expanding the applicability of the methodology,
scientific integrity,
methodological transparency.

Experts from all divisions are involved on both sides – from climate science to investment research and communication.

In addition, right° and GLS Bank, together with other partners, launched a pilot project in 2020 to analyse the Temperature Alignment of real estate.

Looking Ahead: Risk Management

Beyond transparent and consistent reporting, the key objective is to be able to redirect capital towards 1.5°C on a larger scale: The integration of climate impact criteria into credit risk assessment and lending processes.

GLS Bank is now tackling the integration of XDC analyses as part of the lending process – determined to act as a pioneer, sending the message “It can be done!”

To the overview