Paris Agreement Capital Transition Assessment

Together with California Insurance Commissioner Dave Jones, the PRI is pleased to support the development of a free online tool – developed by the 20 Investing Initiative – to assess the risk of climate change in investor portfolios. Integrating the TCFD recommendations requires institutional investors to have better information if they want to move effectively as part of the energy transition. An important recommendation of the TCFD is the need for forward-looking analysis to assess the impact that investor exposure to climate change risks and opportunities could have on portfolio performance over time. However, questions remain about how this approach can be consistently implemented by investors. By giving banks an overview of the climate direction of their corporate equity and spending plans, the PACTA for Banks toolkit is an important step in analyzing climate scenarios for lenders. The toolkit was developed in six years and tested by 17 global banks and more than a dozen academic institutions. 2DII makes the materials of each interested organization available free of charge. 2DII will hold a webiner on October 13 to explain how PACTA works for banks. In the meantime, this article provides an overview of the main features. The Capital Transition Assessment (PACTA) instrument of the Paris Agreement analyzes transition risk in equity and fixed-rate portfolio portfolios in several scenarios, provides overall coverage of energy-intensive sectors, 120 adjustable diagrams and a 30-page production report. The implementation of the instrument supports the ongoing commitment of IRPs and the measures they are taking to help institutional investors move to a low-carbon environment, including aligning the PRI framework with the recommendations of the Climate Financial Information Task Force (TCFD).

The recommendations provide a coherent global framework for translating non-financial information on climate change risks into financial indicators. David Jones, California Insurance Commissioner, commented on the launch: “I congratulate the 2nd Investing Initiative and the PRI for the launch of PACTA, the free online scenario analysis tool. Recognizing the uncertainty of future policy and market developments related to the transition to a low-carbon economy, the scenario analysis determines the extent to which a portfolio is exposed to this uncertain and associated risk, as well as the expected evolution of this exposure over time. The risks associated with climate change take two forms: physical risks (such as sea level rise, storms and forest fires) and the transition risks associated with the transition to a low-carbon economy. While these risks can cause significant disruptions in financial markets, they remain outside the traditional horizon of forecasting and analysis of collateral for credit repayment. PACTA for Banks aims to help banks assess the direction of their lending practices on climate scenarios. For example, banks can use PACTA for banks to assess the impact of climate change on their assets and loans and to analyse risks from EU regulation for carbon-intensive industries to how poor weather can threaten credit risks. In September 2018, we launched the Paris Agreement Capital Transition Assessment (PACTA) tool: a free software that calculates the extent to which the company`s capital is… Read more > The first evaluations began in early 2020 and involve, in addition to Switzerland and the Netherlands, the governments of Austria, Denmark, Italy, Luxembourg, Norway, Portugal, Spain and Sweden.

Private financial institutions, their industry representatives, public financial institutions and supervisory authorities may also participate voluntarily. The expanded model will then be made available to asset managers and