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"Warming Stripes" | Credit: Ed Hawkins (University of Reading)

“Warming Stripes” | Credit: Ed Hawkins (University of Reading)

Measuring the alignment of financial portfolios with climate scenarios

PACTA: Open Source Software for Financial Institutions & Supervisors
The Paris Agreement Capital Transition Assessment (PACTA) is an open-source and free of charge software application that enables users to measure the alignment of financial portfolios with climate scenarios as well as analyze specific companies.

RMI takes stewardship of PACTA to accelerate the financial sector’s transition to net zero
PACTA was originally developed by 2° Investing Initiative (2DII) with backing from UN Principles for Responsible Investment. In June 2022, 2DII transferred stewardship of PACTA to RMI, formerly Rocky Mountain Institute. 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. Full press release: 2° Investing Initiative Transfers Stewardship of PACTA to RMI.

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.

How PACTA Works

PACTA compares what needs to happen in climate-relevant sectors in order to minimize global temperature rises with financial institutions’ exposure to companies in these sectors. It uses a dynamic, forward-looking approach, based on the 5-year production plans of companies in a financial institution’s portfolio.

The methodology measures alignment per sector or per technology, ensuring sector specific needs are included. For example, some sectors need to move more quickly than others; some need to reform (such as power generation); and others need to phase out (for instance, fossil fuels).

PACTA Covers Sectors Producing 75% of Emissions

The climate-relevant sectors currently covered by PACTA are power, coal mining, oil & gas upstream sectors, auto manufacturing, cement, steel, and aviation, with the shipping  to be added soon. Collectively, these sectors account for about 75% of global greenhouse gas emissions.

PACTA has developed two tools to help apply the methodology:

  • PACTA for Investors, an online interactive tool for investors and others to apply PACTA to their equity and corporate bond portfolios.
  • PACTA for Banks, a stand-alone software package and toolkit that enables banks to apply PACTA to their loan books. As part of this, RMI and Asset Resolution provide the underlying company production forecast data for free.

You can find more information on both of these tools using the tabs above.

About RMI

RMI is an independent, non-partisan, nonprofit organization of experts across disciplines working to accelerate the clean energy transition and improve lives. Since its founding in 1982 by Amory Lovins, RMI’s chairman emeritus, RMI has grown to over 500 staff working on four continents with a global reach and reputation.

RMI’s approach is to THINK bigger, DO boldly, and SCALE globally. We apply rigorous research and analysis to unlock market-based solutions that can be replicated and implemented now. We then work with partners to activate the market catalysts—new technologies and business model innovations, finance and capital flows, big data and capacity building, all sped by effective policy—that can drive rapid, systemic change and economy-wide transformation.

About the 2° Investing Initiative

Founded in 2012, the 2° Investing Initiative (2DII) is an international, non-profit think tank working to align financial markets and regulations with the Paris Agreement goals. Working globally with offices in Paris, New York, Berlin, and London, we coordinate the world’s largest research projects on climate metrics in financial markets. In order to ensure our independence and the intellectual integrity of our work, we have a multi-stakeholder governance and funding structure, with representatives from a diverse array of financial institutions, regulators, policymakers, universities, and NGOs. For more information, please visit 2degrees-investing.org, or contact at contact@2degrees-investing.org

Partners

The tool provided on this website is supported by the UN Principles for Responsible Investment. It has received financial support from the European Union’s Life programme under LIFE Action grant No. GIC/FR/00061 PACTA.

PACTA has also received funding 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. The funders are not responsible for any use that may be made of the PACTA tool and/or any information on this website.

PACTA builds on research previously funded by the EU H2020 Sustainable Energy Investing Metrics project. It has also received funding from the ClimateWorks Foundation and the Swiss Environment Ministry.