Transition Risks Assessment of Latin American Financial Institutions & the use of Scenario Analysis

This report provides quantitative evidence on the relevance of climate-related risks for banks and investors in Latin America.

It identifies the types of climate-related risks that Latin American economies could be exposed to and what this implies for financial institutions in the region.

Through a series of proxy metrics, the authors estimate the extent to which banks and investors could potentially be exposed to transition risks. To provide further evidence on potential exposure to these risks, the authors apply the PACTA climate scenario analysis methodology to Colombian pension funds’ and insurers’ portfolios.

The report provides an overview of strategies available for the mitigation of transition risks and discusses which ones might be most suitable for Latin American financial institutions. It also develops a set of recommendations for supervisory authorities, regulators, and governments in Latin America.

About our funders: This report has received funding from the International Climate Initiative of the German Ministry of Environment and the Inter-American Development Bank.

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: the coming weeks, we will update this website with additional information. For now, please note that all contact information remains unchanged.