LONDON/PARIS/BERLIN/NYC, July 1st – The non-profit think tanks 2° Investing Initiative (2DII) and Carbon Tracker Initiative announce a new collaboration to provide an integrated climate scenario analysis solution for financial institutions and companies, based on their existing and upcoming research capabilities. The collaboration brings together the analytics of the two largest independent think tanks on sustainable finance, with over 1,000 users around the world.
The collaboration is designed to leverage Carbon Tracker’s power, oil and gas assessments set out in Breaking the Habit and Powering down Coal with the 2DII Paris Agreement Capital Transition Assessment (PACTA) tool. The two organizations plan to provide company and portfolio analysis through the Transition Monitor Platform, used by over 1,000 organizations around the world.
PACTA is an open-source, IP-rights free online and desktop software that enables users to measure the alignment of financial portfolios with climate goals and analyze specific companies. It taps into a vast climate-related financial database with a special focus on the most carbon-intensive sectors. As of May 2020, PACTA has been applied by more than 1,200 organizations with more than $61 trillion in total AuM, as well as by supervisors and central banks to assess their regulated entities (e.g. European Insurance and Occupational Pensions Authority and California Department of Insurance). On average, more than 500 portfolios are tested every month using PACTA.
Carbon Tracker’s power, oil and gas methodology uses asset-level economics to develop a market-based view of fossil fuel infrastructure in the context of climate limits. This provides users with a granular and cost-optimised pathway to decarbonisation and a window into the distribution of assets that fall outside these limits, highlighting the associated financial risks.
With this collaboration, Carbon Tracker and 2DII aim to further enhance the respective value of their research to users, by improving the quality of data, reports, and other outputs. The collaboration will also enable the creation of a single analytical solution with multiple methodological approaches, enabling users to customize company analysis based on their needs and feature Carbon Tracker’s work in the PACTA tool.
The two organizations will also set up a coordination committee, involving key research and management staff who will oversee the implementation of the collaboration.
Stan Dupré, CEO and co-founder of 2° Investing Initiative, said: “PACTA is a critical part of 2DII’s efforts to provide the financial sector with the data, tools and knowledge they need to help align financial flows with the Paris Agreement. By combining forces with Carbon Tracker, we are reducing the transaction cost of accessing cutting-edge research by bringing together leading research methodologies in one place and harmonizing our approaches. The collaboration will improve data quality and access, as well as ensuring financial institutions have the best tools available to develop impact-oriented strategies that contribute to real world GHG emissions reductions.”
Mark Campanale, Founder and Executive Chair of Carbon Tracker Initiative, said: “We are pleased that our least-cost methodology for the upstream oil and gas and utilities sectors will be available as a choice for company-level analysis on the PACTA platform. Collaborating with 2DII on the use of PACTA will make our insights more accessible to the markets. This isn’t just about providing analysts with better data. At its core is our goal of ensuring that fossil fuel producers align their business plans with the objectives of the Paris climate agreement of ‘well below 2 degrees’ and that investors can, with this data, play a key role in moving companies in this direction.”
Notes to editors
About the Paris Agreement Capital Transition Assessment (PACTA)
Elaborated in collaboration with key academic research players and with backing from UN Principles for Responsible Investment, PACTA for investment portfolios has been available since 2018.
The first-of-its-kind, free software calculates the extent to which corporate capital expenditures and industrial assets behind a given equity, bond, or lending portfolio are aligned with various climate scenarios. It taps into a vast climate-related financial database which covers more than 30,000 securities, 40,000 companies, and 230,000 energy-related physical assets.
As of May 2020, it has been used by approximately 1,200 organizations with more than USD 61 trillion in total AuM, as well as by a number of supervisors and central banks to assess their regulated entities. In 2019, 2DII also started to make available PACTA for corporate lending portfolios, which is currently being tested by leading banks such as ING, Citi, UBS, and more.
About 2° Investing Initiative
The 2° Investing Initiative (2DII) is a global think tank on sustainable finance and the main beneficiary of European research funding on the topic. Based in Paris, Berlin, New York, and London, and working with a close network of internationally based partners, we develop the regulatory frameworks, data, and tools to help align financial markets with climate goals.
In order to ensure our independence and the intellectual integrity of our work, we operate as a non-profit, with a diverse array of financial institutions, regulators, policymakers, universities, and NGOs represented in our governance and funding sources.
2° Investing Initiative has introduced climate scenario analysis of investment and lending portfolios into regulatory frameworks (France, EU, California); investor and banking practices; and supervisory frameworks (UK, EU, California, and Japan). 2° Investing Initiative’s research on the suitability assessment test in Europe triggered, via the High-Level Expert Group on Sustainable Finance, the reform of the Markets in Financial Instruments Directive (MiFID) and the insurance distribution directive (IDD), introduced by the European Commission regulatory package on sustainable finance.
About Carbon Tracker Initiative
Carbon Tracker is an independent financial think tank that carries out in-depth analysis on the impact of the energy transition on capital markets and the potential investment risk in high-cost, carbon-intensive fossil fuels.
Its team of financial market, energy and legal experts apply ground-breaking research using leading industry databases to map both risk and opportunity for investors on the path to a low-carbon future. We work with financial market regulators and with investors in ensuring that markets and companies are aligned with climate science.
Carbon Tracker has cemented the terms “carbon bubble”, “unburnable carbon” and “stranded assets” into the financial and environmental lexicon through its research and advocacy work with investors, regulators and policy makers.