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May 31, 2022

From Bogotá to Kuala Lumpur: New studies from 2DII’s Emerging Markets team

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2DII’s Emerging Markets team and its partners have carried out several new studies in Latin America and Southeast Asia, focused on portfolio alignment, climate-related risk assessment, and other issues. These include among the first PACTA Coordinated Projects in emerging markets – an initiative in which 2DII works with governments, supervisors, and industry associations to assess national financial sector alignment with climate goals.

So far, 2DII has collaborated with over 16 countries to carry out these assessments, covering more than €11 trillion in assets and over 2,600 financial institutions across four continents. In addition, this year we carried out our first study in Southeast Asia in partnership with WWF Malaysia, with plans to further expand our work in the region in partnership with local financial institutions and NGOs. Learn more about our latest work below!

From Bogotá to Paris? Measuring the Climate Alignment of Colombian Insurance Companies’ Portfolios

This report uses the Paris Agreement Capital Transition Assessment (PACTA) methodology to measure Colombian insurers’ alignment with climate scenarios and their exposure to climate-related risks. The aim of this work is to help Colombian insurers better integrate climate considerations into their decision-making processes, as well as mitigate climate transition risks. It follows a pioneer study carried out by 2DII and the Colombian insurance industry association (Fasecolda) in 2019, which at the time was the first exercise of its kind in Latin America and the second in the world with an industry association. As with the initial study, Fasecolda supported this project from the beginning and played a key role in raising awareness in the sector about the importance of participating in this type of analysis.

This work is part of the project “Preparing the public and financial sector for Climate transition risk: Capacity building and call to action,” financed by UK PACT Colombia and led by Universidad de Los Andes in consortium with WTW and 2DII.

Read the report here.

Assessing Readiness for the Low-Carbon Transition: A study with the Peruvian Responsible Investment Program

Another PACTA Coordinated Project, this study uses the PACTA methodology to measure the climate alignment of five Peruvian pension fund investment portfolios in seven climate-relevant sectors. It includes an aggregate analysis at sector level and identifies potential exposure to transition risks, as well as potential opportunities related to the transition to a low-carbon economy. Each pension fund also received individual results with company-level information, to help them better understand the sources of their risk exposure and as a basis for engaging with companies or setting strategies to align with climate goals.

This work has received funding from the UK PACT Green Recovery Challenge Fund, which aims to mainstream climate-related financial risks and opportunities in order to accelerate the low-carbon transition and enable a green recovery.

Read the report here.

Climate Portfolio Alignment for Corporate Lending in Malaysia

This report by 2DII and WWF Malaysia analyzes Malaysian banks’ exposure to climate critical sectors as a source of future climate transition risk, with funding from UK PACT. Applying the PACTA climate scenario analysis tool to a pilot group of Malaysian banks, we found that the gas and coal power generation portfolio is aligned with the Sustainable Development Scenario in Southeast Asia. However, 8 out of the 10 climate critical technologies assessed are not aligned with the Paris Agreement goals.

Together with WWF Malaysia, we made a series of recommendations for the implementation, improvement and actionability of PACTA for banks and supervisors in the Southeast Asia region, with supporting illustration on just transition. We hope that additional banks in Malaysia and the wider region will join the pilot group in measuring their climate alignment and risk exposure. This work is supported by UK PACT Malaysia.

Read the report here.

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2DII today announced it is transferring stewardship of the Paris Agreement Capital Transition Assessment (PACTA) to RMI, formerly Rocky Mountain Institute. PACTA measures financial portfolios' alignment with various climate scenarios, including those consistent with the Paris Agreement. Under RMI’s stewardship, PACTA will remain a free, independent, open-source methodology and tool, and will continue to provide the financial and supervisory community with forward-looking, science-based scenario analysis to help users make climate-aligned financing decisions. RMI will invest in scaling up PACTA’s usability and applicability in day-to-day investment decisions as well as reporting requirements.

Access the full press release here: https://2degrees-investing.org/2-investing-initiative-transfers-stewardship-of-pacta-to-rmi/In the coming weeks, we will update this website with additional information. For now, please note that all contact information remains unchanged.