The 2° Investing Initiative (2DII) is transferring responsibility over the Paris Agreement Capital Transition Assessment (PACTA) to RMI. PACTA is an open-source climate tool for financial institutions and regulators that measures the alignment of financial portfolios and companies with climate goals.
Berlin / Paris / New York – June 8, 2022
The 2° Investing Initiative (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.
2DII introduced the concept of measuring the alignment of financial portfolios with climate goals with the launch of the PACTA methodology in 2015. In subsequent years, 2DII further developed PACTA in partnership with over 50 financial institutions and research partners, including the Principles for Responsible Investment, Frankfurt School of Finance, and University of Zurich. PACTA has been used by more than 3,000 financial institutions across over 90 countries, as well as by supervisors and central banks, to assess their regulated entities. Users include governments from Switzerland, Luxembourg and Norway, as well as supervisors such as the European Insurance and Occupational Pensions Authority and New York State Department of Financial Services. Over the past two years alone, more than 30,000 portfolios have been assessed with the PACTA tool.
“2DII is first and foremost a research organization focused on incubating and developing new solutions that drive the climate transition in financial markets,” says Jakob Thomä, Executive Director of 2DII Germany. “As a result, we never intended to run PACTA indefinitely. Over the past few years, it has become clear that we weren’t the best home to allow PACTA to scale in a way that maximizes its impact. We are incredibly excited to have found such a strong partner in RMI, who will help bring new ideas and synergies to PACTA and who shares our vision about maintaining PACTA as a public good. I have always felt that we were the custodian of PACTA, not the owner. As a good custodian, we must also recognize the need for the next step in PACTA’s journey.”
“Our role at 2DII is to launch research projects and innovative approaches, and to promote their appropriation by the main financial actors, not to run them when they have reached a certain level of maturity,” says Robin Edme, Chair of the Board of 2DII France. “PACTA’s transfer to RMI is a perfect illustration of this ambition. We are confident that RMI, a longtime partner of 2DII, is a perfect choice for taking over the development and evolution of PACTA, in terms of skills, independence, and scientific integrity. 2DII will naturally continue collaborating with RMI in developing joint innovative research programs.”
The transfer of PACTA will enable 2DII to redouble its focus on incubating and further developing its current suite of research programs, notably the Retail Investment Program which includes the MyFairMoney platform, the Impact Program, the 1in1000 research stream, the capacity building risk simulations, and the emerging markets programs.
Under RMI’s stewardship, PACTA plans to increase its user base and enrich the user experience; improve its methodology to allow for more precise indicators; and bridge the gap between financial scenario analysis, corporate action, and government regulation and enforcement.
“We are humbled and delighted to be taking stewardship over a public good as essential to the net-zero transition as PACTA,” says Brian O’Hanlon, RMI’s Managing Director for Climate Finance “By investing in PACTA, we can help bring its valuable insights to more decision makers around the world. Tools such as these are critical to our mission of accelerating the financial sector’s transition to climate alignment and the financing of a just, equitable, and secure net-zero future.”
The PACTA team will have access to RMI’s full suite of industry partners, technoeconomic analysis, and sectoral experts, including RMI’s Center for Climate-Aligned Finance. With RMI’s backing, financial institutions will use PACTA more regularly and more deeply, and the PACTA team will be able to extend their offerings to even more users around the world.
“Before a bank provides a dollar of debt for a project or company, that bank should have the ability to understand whether that dollar gets the planet closer or further away from a 1.5°C-aligned pathway,” adds O’Hanlon. “PACTA is perhaps the only open-source tool out there that does that.”
“I am thrilled by the transition of PACTA from 2DII to RMI,” says Maarten Vleeschhouwer, Head of PACTA. “2DII has done an exceptional job in founding and developing PACTA, a unique and independent approach to measuring alignment. Now is the time for PACTA to meet the increasing demands from our stakeholders and users in terms of ease of use, scalability, and linkages to target-setting frameworks, and RMI is the absolute right home to do just that.”
The PACTA climate scenario analysis methodology helps financial institutions and regulators to assess the alignment of portfolios with climate benchmarks and steer towards a net-zero pathway. Launched in 2018, PACTA was developed by 2° Investing Initiative (2DII) with a range of partners, including the Principles for Responsible Investment, University of Zurich, and Frankfurt School of Finance.
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. Sectors covered include power, coal mining, oil & gas upstream sectors, auto manufacturing, cement, steel, and aviation, with the shipping industry to be added soon. Collectively, these sectors account for about 75% of global greenhouse gas emissions. PACTA relies on physical, asset-based company data, providing granular, regional, sector-specific, forward-looking production pathways that can be compared with various scenarios. PACTA comprises two tools:
- 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.
PACTA now features a Transition Disruption Metric, which helps investors prepare for potential portfolio disruption stemming from risks associated with a disorderly transition to a low-carbon economy.
RMI is an independent nonprofit founded in 1982 that transforms global energy systems through market-driven solutions to align with a 1.5°C future and secure a clean, prosperous, zero-carbon future for all. We work in the world’s most critical geographies and engage businesses, policymakers, communities, and NGOs to identify and scale energy system interventions that will cut greenhouse gas emissions at least 50 percent by 2030. RMI has offices in Basalt and Boulder, Colorado; New York City; Oakland, California; Washington, D.C.; and Beijing.
More information on RMI can be found at www.rmi.org or follow us on Twitter @RockyMtnInst.