Welcome to the 2°C Scenario Analysis homepage of the 2° Investing Initiative, supported by the UN Principles for Responsible Investment.
This website hosts the research of 2° Investing Initiative and its partners, designed to help financial institutions integrate climate objectives and long-term climate-related risks into their portfolio management. You can find a number of different tools and analysis on this website, all open-source and IP-rights free:
- The PACTA climate scenario analysis tool for listed equity and corporate bonds portfolios, applied by over 1,000 investors around the world on over 7,000 portfolios to date;
- Methodology documentation and source code for the PACTA methodology for corporate lending, which allows banks to replicate the PACTA climate scenario model. Contact us to find out more about PACTA;
- The Bank of England 2019 climate stress-test for insurance companies (online from mid-July 2019);
- A dynamic stress-testing module allowing investors to develop their own stress-testing frameworks and apply them on their portfolio (online from Q3 2019);
- A target-setting module designed to help set science-based targets for financial portfolios (online from Q4 2019)
- Company reports for engagement, developed in collaboration with key NGOs and data providers, and informing the CA100+ engagement initiative (online from Q4 2019);
The website also hosts a library of 2° Investing Initiative research reports, set to be expanded to host reports from partner organizations over the next year. It will also be home to future industry association climate pilot applications and the 2020 PACTA country pilot involving a UN-coordinated Paris Agreement assessment on progress relative to Art. 2.1c. Contact us to find out more.
While this website is hosted by 2° Investing Initiative, it is designed to be home to leading models, data, software, and analytical solutions at the nexus between climate change, long-term risks, and financial markets. If you or your organization want to get involved in hosting your outputs on this website, or using the underlying source code for your work, get in touch!
What is in it for you?
The tools on this website can help you respond to a range of research questions and needs:
- Free and confidential assessment of how your listed equity and corporate bonds portfolios compare to a 2°C transition (as defined by the IEA);
- Insight into how your climate policies compare to your peers;
- A better understanding of potential capital misallocation and potential associated financial risk under 2°C transition, as well as the ability to implement supervisory stress-tests;
- Aligning with the Financial Stability Board Task Force on Climate-Related Financial Disclosures recommendations on 2°C scenario analysis.
The tool provided on this website is supported by the UN Principles for Responsible Investment. It is financially supported by the European Commission LIFE Action Grant, the ClimateWorks Foundation, and the Swiss Environment Ministry. It builds on research previously funded by the EU H2020 Sustainable Energy Investing Metrics project. As of June 2019, it has been used by over 700 institutions globally.
Who is the 2° Investing Initiative?
The 2° Investing Initiative (2°ii) was set up in 2012 with the mission of aligning financial markets with climate goals. It has since become the leading global think tank – with offices in Berlin, Paris, London, and New York City – on integrating climate goals and long-term risks into investment decision-making and financial regulatory regimes.
Our work has been at the forefront of climate scenario analysis, stress-testing, and sustainable finance policies. In 2015, we helped the French government initiate the first mandatory climate disclosure and target-setting frameworks for investors. In 2017, we launched a climate scenario analysis project in Switzerland in partnership with the Swiss Federal Office for the Environment (FOEN) and the State Secretariat for International Affairs (SIF), working with two-thirds of the Swiss pension fund and four-fifths of the insurance market.
Our PACTA climate scenario analysis tool, following a three year road-test and development phase, has been applied by over 600 investors to date on over 3,000 portfolios. We have partnered with the Bank of England, California Insurance Commissioner, and European Insurance and Occupational Pensions Authority (EIOPA) on integrating climate transition risks into financial supervision and stress-tests.
In order to help expand the tool's reach in new sectors, in February 2019, we began working with a group of 17 banks to road test the PACTA climate scenario methodology for corporate lending portfolios. The methodology, as well as the metrics supporting the analysis, allows banks to study the alignment of their corporate lending portfolios with 2°C benchmarks. It represents a major step forward in climate scenario analysis, by providing banks with insights into the climate impact of their clients’ capital expenditure plans across the seven sectors the methodology covers (oil & gas, coal, power, automotive, cement, steel, and shipping). By closely examining the gaps between their lending portfolios and climate benchmarks, banks can in time also leverage the methodology for other uses, including reporting and steering towards a positive climate impact. After the end of the pilot phase in Q1 2020, the IP rights-free, open source software will be released, enabling any bank to carry out the analysis entirely autonomously.
In addition to our scenario analysis and portfolio work, we also work with consumer associations, banks, and financial supervisors on integrating non-financial investment objectives into the retail investor market.
Our work covers the entire value chain of knowledge generation, from fundamental, academic research to supporting its application by commercial actors. All of our entities operate under strict non-competition rules. We have no commercial service contracts and all of our research models and software are IP-rights free and open-source.
If you have any further queries, don't hesitate to contact us.