More and more development finance institutions (DFIs) are exploring the use of countries’ long term strategies (LTSs) as they seek to implement Paris-aligned investment strategies. This report focuses on the role of countries’ LTSs in the Paris alignment approaches of DFIs. It explores the possible roles of both the LTS development process and the resulting LTS document in providing insights on the Paris alignment of investments within financial institutions’ investment decision-making processes.
The report looks primarily at the multilateral development banks (MDBs), in view of the current operationalisation of their Paris alignment commitments, as well as their ongoing support for LTS development within their respective areas of intervention. Despite this focus, the findings are relevant for other DFIs, and may also be potentially useful for a broader range of financial institutions and economic actors. The target audience for this report mainly includes DFIs and other entities involved in LTS development (governments, experts from NGOs and intergovernmental organisations), as well as DFI shareholders.
The findings are drawn from an analysis based on a literature review, the outcomes of a workshop held alongside COP26, and interviews with three think tank experts and 10 DFI practitioners. The report provides guidelines on how LTSs can be used to increase DFI Paris alignment and how this potential use can be improved, through both recommendations relevant to LTS development for this purpose, and to DFI operations in order to fully harness this potential.