Paris Alignment of DFIs: What the Developer Must Demonstrate

Paris alignment is not a declaration of intent to be signed at the end of appraisal. It is a demonstration to be built on two pillars, mitigation and adaptation, which the climate teams of lenders examine project by project. A file that confuses alignment with carbon footprint is rejected. This article details what alignment covers for an infrastructure project, what the developer must concretely prove on each of the two pillars, and the deliverables that make the difference in due diligence.

From lender commitment to project requirement

The Paris Agreement sets out three objectives. Limiting warming, strengthening adaptation, and reorienting finance. This third objective is often forgotten. It aims to make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development (Paris Agreement, Article 2.1 c).

This phrase commits states. It also commits, by extension, development finance institutions. The major multilateral development banks have made a collective commitment to align their new operations with the objectives of the Paris Agreement, and have built a common approach for assessing it. Bilateral DFIs, including Proparco and BII, have defined their own methodologies, in the same spirit.

For a developer, the consequence is straightforward. Paris-aligned financing cannot support a Paris-non-aligned project. Project alignment therefore becomes a condition of access to financing, on the same basis as compliance with E&S performance standards. It is appraised in parallel, with its own deliverables.

Two pillars to demonstrate, never just one

The most common error is to reduce alignment to carbon. A project sponsor arrives with a well-prepared greenhouse gas balance and believes they have addressed the subject. They have addressed half of it.

The common approach of multilateral banks rests on two distinct pillars. The first is alignment with mitigation objectives: is the project compatible with a low greenhouse gas emissions trajectory. The second is alignment with adaptation and resilience: is the project protected against climate hazards and does it not reduce the adaptive capacity of the environment and populations.

These two pillars address two opposing questions. Mitigation asks what the project's effect on the climate is. Adaptation asks what the climate's effect on the project is. A development can be irreproachable on one and weak on the other. A solar power plant emits almost nothing, but remains exposed to heatwaves and floods. A credible file addresses both pillars, separately and explicitly.

The mitigation pillar: proving the low-carbon trajectory

On mitigation, lenders' logic distinguishes cases according to sector and the nature of the activity.

Certain activities are considered aligned by nature. Renewable energy, energy efficiency, a large proportion of clean transport fall into this category. For these projects, the demonstration is lightened, but not null. Lock-in carbon effect must be confirmed as absent and assumptions documented.

Other activities require case-by-case justification. This involves showing that the project fits within a trajectory compatible with long-term objectives, and not that it simply avoids a more emitting solution. A long-life asset that would lock in emissions for decades poses a lock-in risk. The developer must then address this risk head-on. How does the asset fit within the decarbonisation of the sector and the country. Does a credible trajectory for reduction or phase-out exist.

The documentary foundation of this pillar is the emissions balance. It is not enough to add up tonnes. Perimeters must be delimited, a defensible reference scenario chosen, and emissions avoided estimated with prudence. This work directly aligns with the method of calculating carbon footprint by scopes, and benefits from articulation with EU Taxonomy criteria when financing refers to it. An emissions figure without explicit method has no probative value.

The adaptation pillar: assessing risk then addressing it

On adaptation, the expected demonstration follows a logical chain. Hazards are identified, the asset's exposure and vulnerability are assessed, then resilience measures are integrated.

The first step is a physical climate risk assessment. What hazards threaten the project over its lifetime: floods, droughts, heatwaves, extreme winds, sea level rise. This analysis must take into account climate evolution, not just past observations. A structure dimensioned on historical series may find itself under-dimensioned at mid-life. This requirement is developed in our article on physical climate risk of a hydroelectric project, transposable to other infrastructure.

The second step is the response. Once material risks are identified, the project must show how it adapts to them. This can involve dimensioning of structures, choice of location, safety margins, or operational management measures. Adaptation alignment does not require zero risk. It requires that significant risks be identified and addressed proportionately.

The third dimension is often neglected. The project must not reduce the adaptive capacity of others. A development that monopolises an already scarce water resource, or that transfers flood risk downstream, runs counter to the resilience objective. This non-regression logic aligns with climate resilience of infrastructure taken in the broad sense of the territory.

What Article 2.1 c changes in project delivery

The temperature objective of the Paris Agreement, holding the increase in the global average temperature to well below 2 °C (Article 2.1 a), remains a macroeconomic framework. What affects the developer day-to-day is its translation into appraisal criteria.

Three shifts follow. First, alignment is assessed early. A non-alignable activity cannot be remedied by a compensation measure at the end of the process. The subject must be addressed from categorisation, when technology and location are still being chosen.

Next, alignment is documented as a deliverable in its own right. It is not summarised in one line in the impact assessment. It requires a dedicated alignment note, which addresses both pillars and cites its assumptions.

Finally, alignment links to climate reporting. Reporting frameworks require description of climate governance, risks and indicators. An aligned project naturally feeds this reporting. A poorly appraised project undermines it. The two exercises inform each other.

Building the alignment file

Beyond principles, appraisal is decided on concrete documents. Here is what climate teams look for in a file.

Paris alignment is demonstrated, it is not declared. Three reflexes avoid file resubmission. Address both pillars, never reducing alignment to carbon alone. Pose the alignment question from categorisation, when structural choices are still open. Document each assumption, because a figure without method proves nothing.

The right question is not "does my project emit little", but "is my project compatible with a low-carbon trajectory and does it withstand the climate to come". A file that answers both passes climate appraisal. A file that addresses only one undergoes it.