Sep 30, 2021



This week we conducted the second session of the series “Methodologies and tools for Paris Alignment”. In this occasion, Nicholas Dodd, Nayra Herrera, George Harris, Lars Eric Mangset and Irene Ben Rejelo walked us through Paris Agreement Capital  Transition Assessment (PACTA).  

The organization of this series emerged from the development of a paper in collaboration with the Coalition of Finance Ministers for Climate Action, named “Paris Alignment for Private Financial Institutions: Commitments and Methodologies”.  You can read the key findings here. 

This research showed that sustainable finance initiatives have quintupled in the last decade, and climate change is still their main focus of attention. Groups of financial institutions have likewise collectively stepped up worldwide to advance on aligning their portfolios with the zero-carbon transition.

Yet, they have increasingly been working towards Paris alignment through commitments and pledges, mostly through internationally convened networks. Although commitments on Paris alignment are a fundamental step towards decarbonizing portfolios and balance sheets, the operationalization of commitments remains challenging.

In this session, we focused on PACTA methodology, which has been developed by the 2 Degrees Investing Initiative in conjunction with a wide range of partners. It is an open-source and free online tool that assesses the alignment of your corporate bond, loans, and listed equities exposure to eight economic sectors, covering roughly 75% of GHG emissions. 

The tool compares what needs to happen in sectoral climate transition pathways with financial actors’ exposures to companies in these sectors and their 5-year forward-looking production plans, allowing for a dynamic, scenario-based, and forward-looking approach. Furthermore, this methodology is extended by a stress-testing module that assesses the influence on assets’ prices of various climate scenarios. 

In addition, PACTA has also established itself as a model for financial supervisors and central banks to run scenario analysis and climate stress tests.

Until now, the webinars have been a success. In FC4S, we are convinced that financial sector representatives including banks, investment firms and asset managers, capital market actors (both public and private), as well as representatives from the insurance industry, must constantly train and be informed of the avant-garde tools to work towards the Paris Agreement; and zero-carbon transition.

Thank you to everyone who participated live. In this link you can watch the recording. If you were unable to attend, we hope to see you at the next webinar.

Future dates: 

SBTI: October 4th at 17h CET, and October 7th at 10h CET.