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Ahead of the UN Climate Action Summit 2019, the governments of Switzerland and the Netherlands presented a new initiative to measure and align financial flows with the Paris Agreement’s 1.5°C goal.

Under the terms of the pledge, participating governments and financial institutions are using the PACTA methodology devised by 2° Investing Initiative to compare their investments and financing with climate benchmarks.

The first assessments started in early 2020 and involve the governments of Austria, Denmark, Italy, Luxembourg, Norway, Portugal, Spain, and Sweden, in addition to Switzerland and the Netherlands. The assessment is also expected to be deployed in France with Finance for Tomorrow as part of Finance ClimAct, an initiative to help implement the EU Sustainable Finance Action Plan. Private financial institutions, their industry representatives, public financial institutions, and supervisory authorities can also voluntarily participate. The expanded model will later be made available for asset managers and banks, in addition to Swiss pension funds and insurance companies.

Participants can directly access the assessment platform here.

New report: Bridging the Gap – Measuring Progress on the Climate Goal Alignment & Climate Actions of Swiss Financial Institutions

Published in November 2020, this broad, comparable analysis covering all major Swiss financial market participants shows progress on alignment with climate goals, but major gaps remain. Switzerland is the first of several major European financial centers – including France, Austria, Sweden, and Norway – to measure progress on finance-related climate goals in the run-up to COP26.

The report is based on a climate compatibility assessment of 179 Swiss financial institutions representing around 80% of the market, more than double the number of institutions that participated in the 2017 pilot study. A new module for Swiss real estate and mortgage portfolios also enabled the assessment of three-quarters of all Swiss residential properties.

Key findings

The study assessed the alignment of the Swiss financial sector with climate benchmarks, using 2DII’s Paris Agreement Capital Transition Assessment (PACTA) methodology. For the first time, 2DII and its partners were able to measure progress across a vast swathe of the financial sector over the past three years, shedding light on the distinction between portfolio reallocation and real-world emissions reductions.

Read more here.

Background: 2DII’s 2017 collaboration with the Swiss Federal Office for the Environment

This initiative is based on a successful pilot project that 2DII ran in partnership with the Swiss government. In 2017, the Federal Office for the Environment and the State Secretariat for International Finance invited pension funds and insurance companies to use the PACTA methodology to test the climate compatibility of their investments. 79 pension funds and insurance companies, representing about two-thirds of the total market as measured by assets under management, used the PACTA methodology to test their portfolios for climate compatibility. Following the exercise, 40% of participants said that the analysis triggered climate-related actions.

Thanks to the success of this engagement, Switzerland and the Netherlands joined forces to launch the 2020 PACTA initiative to measure and align financial flows with the Paris Agreement’s 1.5°C goal.

For more information on the 2017 assessment, see our report: “Out of the fog: Quantifying the alignment of Swiss pension funds and insurances with the Paris agreement.”

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