While many DFIs have communicated their 2050 net-zero ambitions, set climate finance targets, and changed operational processes to align with the Paris Agreement, DFIs need to balance globally aligned emissions paths with their mission to advance economic development.

Further, as long-term investors, their portfolios may turn over too slowly to accommodate rapid emissions declines, and a net-zero portfolio target-with strict intermediate targets and pathways-does not reward "Transition" projects aimed at decarbonising high-emissions sectors or supporting essential supply chains. The challenge of selecting the right emissions pathway is complicated by the fact that the declared emissions objectives of most portfolio countries are not yet fully Paris-aligned.

An important prerequisite is that participating DFIs must have similar net-zero targets to prevent the leakage of emissions to less ambitious institutions. Transition credits for projects with strong carbon benefits: To reward transition projects with either high emissions reductions or supply chain benefits, DFIs could introduce a system of "Transition credits", which would offer a discount on project emissions.

Monitoring the emissions of completed projects: DFIs and their clients should commit to continue reporting emissions beyond project-end, taking advantage of the monitoring systems that were put in place during the project.

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