This report seeks to explore options around integrating transition risk into mainstream stress-test scenarios used by financial supervisory authorities.
At macro level, transition risks are not material enough in the short-term to impact the existing macroeconomic parameters, nor the existing asset class assumptions
At sectoral level in turn, transition risk scenarios become relevant, but the sectoral detail of these scenarios is too granular and expansive for the existing stress-testing framework;
Furthermore, in order to integrate climate factors into stress testing, supervisors face a number of obstacles notably the mismatch of the time horizon of risk models (3 years) on the one hand, and the speed and time frame of climate risks materialization, on the other hand
The report analyses options for integration into macroeconomic, asset-class and sector risk factors. It focuses in particular around the implications of considering the shock described in the ‘too late, too sudden’ paper of the ESRB advisory scientific board (2016).
Independent, non-profit think tank working to align the financial sector with international climate goals.
© The 2° Investing Initiative
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.
