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Paris Agreement Capital Transition Assessment (PACTA)

Developed by 2° Investing Initiative with backing from UN Principles for Responsible Investment, PACTA enables users to measure the alignment of financial portfolios with climate scenarios.

Free and open-source, PACTA has been available since 2018 as an online tool for equities and fixed income portfolios.

In September 2020, 2DII also launched PACTA for Banks, a free, open-source climate scenario analysis toolkit for corporate lending portfolios. Developed with the input of leading global banks, universities, and NGOs, PACTA for Banks enables users to measure the alignment of their corporate lending portfolios with climate scenarios across key climate-relevant sectors and technologies.

Thus far, PACTA has been used by over 1,500 financial institutions worldwide, as well as by supervisors and central banks to assess their regulated entities (e.g. European Insurance and Occupational Pensions Authority (EIOPA), California Department of Insurance, Bank of England, and more). On average, more than 600 portfolios are tested every month using PACTA.

Access the online version of tool here: TransitionMonitor.com.

How it works

Building off a vast climate-related financial database, the PACTA tool aggregates global forward-looking asset-level data (such as the production plans of a manufacturing plant over the next five years), up to parent company level. The tool then produces a customized, confidential output report, which allows investors to assess the overall alignment of their portfolios with various climate scenarios and with the Paris Agreement.

PACTA for Banks allows users to get a granular view of the alignment of their corporate loan books by sector and related technologies, at both the corporate client and portfolio level. Banks can use this information to help steer their lending in line with climate scenarios; to inform their decisions around climate target-setting; and to gain insights into their engagement with clients on their respective climate actions. The toolkit can also help banks identify their exposure to transition risks associated with a disruptive shift to a low-carbon economy.

In addition to enabling users to measure the alignment of their portfolios, PACTA also helps investors implement the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), as well as comply with related regulations (Article 173 of France’s Law on Energy Transition for Green Growth, upcoming EU disclosure requirements, and more).

Background

2DII began developing the PACTA tool in 2014, in partnership with academic organizations including the Frankfurt School of Finance and the University of Zurich, funding from the European Commission, German and Swiss governments, and support from UN Principles for Responsible Investment.

In 2019, 2DII started working with an array of stakeholders acrosss the banking, NGO, and university sectors to extend the PACTA methodology to the corporate lending sector. The toolkit has since been road-tested by 17 leading global banks from Europe, North and South America. These include ABN AMRO, Bancolombia, Barclays, BBVA, BNP Paribas, Citi, Credit Suisse, Groupe BPCE, ING, Itaú Unibanco, KBC, Nordea, Santander, Société Générale, Standard Chartered, UBS, and UniCredit.

Financial institutions using the tool
1,500+
Countries represented among users
90+
Securities covered in the database
30,000+
Companies included in the database
40,000+
PACTA for investment portfolios
  • More than 1,500 financial institutions have used the tool to analyze their portfolios
  • Users from 90+ countries
  • A climate-related financial database covering:
    • 30,000+ securities
    • 40,000+ companies
    • 230,000+ energy-related physical assets
PACTA for regulators and supervisors
PACTA for corporate lending
  • Available on TransitionMonitor.com as a free, open-source toolkit since September 2020
  • Developed with the input of NGOs, universities, as well as 17 major international banks: the five Katowice Pledge banks (BBVA, BNP Paribas, ING, Société Générale, Standard Chartered), as well as ABN Amro, Bancolombia, Barclays, Groupe BPCE, Citi, Credit Suisse, Itaú Unibanco, KBC, Nordea, Santander, UBS, and Unicredit
  • Thus far, an estimated $550 billion in assets have been analyzed out of the banks’ ~$18 trillion in total assets (climate-relevant scope)

Note on the funders: The PACTA tool has received funding from the European Union’s Life programme under LIFE Action grant No. GIC/FR/00061 PACTA. It has also received support from the International Climate Initiative (IKI). The Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) supports this initiative on the basis of a decision adopted by the German Bundestag.

This webpage reflects only the author’s view and the funders are not responsible for any use that may be made of the information it contains.

 

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