Paris Agreement Capital Transition Assessment (Pacta)

In order to expand the scope of the tool into new sectors, we started working with a group of 17 banks in February 2019 to test the PACTA climate scenario methodology for corporate loan portfolios. The methodology and analytical support measures allow banks to examine the orientation of their corporate loan portfolios towards benchmarks at 2°C. It represents a major breakthrough in climate scenario analysis by giving banks insight into the climate impact of their clients` investment plans in the seven sectors that cover the methodology (oil and gas, coal, energy, automotive, cement, steel and shipping). By closely examining the gaps between their loan portfolios and climate benchmarks, banks can use the methodology for other purposes over time, including reporting and managing positive climate impacts. After the end of the pilot phase on the 1st Quarter of 2020 will be published the open source software without IP rights, which allows each bank to perform the analysis completely autonomously. Pri is pleased to support, together with California Insurance Commissioner Dave Jones, the implementation of a free online tool, developed by the 2⁰ Investing Initiative to assess the risk of climate change in investors` portfolios. PACTA for investment portfolios is available online under www.transitionmonitor.com/. David Jones, California Insurance Commissioner, commented on the launch as I said: “I congratulate the 2° Investing initiative and pri on the launch of PACTA – the free online scenario analysis tool. Recognizing the uncertainty surrounding future policy and market trajectory with respect to the transition to a low-carbon economy, scenario analysis can highlight the extent to which a portfolio is exposed to and associated with this uncertain risk, as well as the expected evolution of this commitment over time.

The implementation of the TCFD recommendations requires institutional investors to be better informed if they want to navigate the energy transition effectively. An important recommendation of the TCFD is the need for forward-looking analysis to assess the impact of investors` exposure to climate change risks and opportunities on portfolio performance over time. However, the question remains how this approach can be consistently implemented by investors in practice. The introduction of the instrument supports the PRI`s continued commitment and measures to help institutional investors transition to a low-carbon environment, including the adaptation of the PRI reporting framework to the recommendations of the Task Force on Climate-Related Financial Exposures (TCFD). The recommendations provide a single global framework for translating non-financial information on climate change risks into financial indicators. PACTA for Banks allows users to have a detailed overview of the orientation of their business credit books by sector and related technology, both at company and portfolio level. banks can use this information to manage their loans on climate scenarios; inform their decisions on setting climate targets; and to gain insight into their collaboration with clients on their respective actions in the fight against climate change. This toolkit can also help banks identify their exposure to the transient risks of a disruptive transition to a low-carbon economy. Initially, the volume of PACTA 2020 valuations focused on asset portfolios. . .

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