The goal of this program is to measure the alignment of the entire financial sector as well as the individual participating institutions. The outcome can be used by governments, supervisors, and participating FIs to inform their climate finance strategies. Already, 2DII has helped to run the assessments in Switzerland, Liechtenstein, and Austria. Additional governments and supervisors, including the Netherlands, Norway, and Luxembourg, are set to do the same over the course of 2021. 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.
How it works
Governments, supervisors, and industry associations who have signed onto PACTA COP act as hosts of the coordinated assessments, inviting relevant financial institutions and associations to participate in the analysis on a voluntary basis. Participants then upload their equity and corporate bond portfolios to a dedicated, secure, and confidential platform, which in turn delivers individual climate alignment results with anonymized peer comparisons. Loan book portfolios are analyzed by the participating banks themselves. As part of this process, the participating financial institutions are also asked to respond to a qualitative survey on climate-related investment strategies, in order to capture other initiatives in greening their investments. 2DII offers participants access to a new stress-testing module to help measure their exposure to transition risks.
As a last step, the host government, supervisor, or industry association receives an aggregate-level report containing the results for the entire participating financial sector. This report provides a unique overview of financial institutions’ exposure to key climate-relevant sectors and their alignment with the Paris Agreement goals, aggregated by peer group. All reports, including the aggregated results and the individual reports for the participating institutions, are confidential, and there is no obligation whatsoever to publish any information. It is the decision of the government to publish the meta results and the individual participants to publish their individual results.
Results & impact thus far
So far, 2DII and its partners have successfully completed and published the results from the assessments in Switzerland, Liechtenstein, and Austria, with more forthcoming in 2021.
The results from the Swiss assessments were particularly revealing, because they track progress from the pilot study in 2017 to 2020. In the latest assessment, over 4,000 portfolios from 179 financial institutions representing roughly 80% of the market were assessed – 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.
Liechtenstein (2020): “Assessing the Alignment of the Liechtenstein Financial Sector with the Paris Agreement”
Austria (2021): Am Zielpfad nach Paris?