Swiss PACTA to look at financial institutions' climate impact - IPE.com
Swiss PACTA to look at financial institutions’ climate impact | News | IPE
This year’s Paris Agreement Capital Transition Assessment (PACTA) Climate Test in Switzerland aims to improve knowledge about the impact on climate by financial market players, regularly measuring progress towards climate goals, according to a document issued by the Swiss Federal Office for the Environment (FOEN).
The 2024 test is expanded to also cover real estate and mortgages, whereas a survey will help to understand how the Swiss financial market is implementing existing and future regulatory requirements and recommendations by the Federal Council and other industry associations.
The test consists of two quantitative modules and a survey that will measure investments in equity and corporate bonds under different climate scenarios in eight climate-relevant sectors, including electricity generation, coal mining, oil, gas, automobile manufacturing, cement, steel and aviation, the document stated.
One part of the analysis is conducted by using the PACTA “equities and bonds” module, an open source software originally developed by the 2°Investing Initiative (2DII) to measure the climate impact of financial institutions’ portfolios, further developed by nonprofit organisation Rocky Mountain Institute (RMI) since 2022, it added.
A second part of the test is conducted using the “real estate and mortgages” module to examine the emission intensity of buildings in Switzerland, comparing results with the climate targets to achieve 1.5°C.
This module was originally developed by real estate consultancy Wüest Partner on behalf of FOEN, and further developed by consultancy and research firm Fahrländer Partner Raumentwicklung (FPRE) for the PACTA climate test 2024.
The qualitative survey records climate strategies and other climate-relevant measures that financial market players have already taken across all of their business activities, it added.
The Swiss Federal Office for Environment (BAFU) and the State Secretary for International Finance (SIF) have officially invited pension funds, asset managers and other financial institutions to conduct this year’s test.
Institutions can take part in the test registering on the Transition Monitor platform from 1 March to 17 May.
Swiss pension funds association ASIP, Asset Management Association Switzerland AMAS, Swiss Sustainable Finance (SSF), and the Association for Responsible Investments SVVK-ASIR are among those backing the test.
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Related Knowledge Center: Climate economics
Climate change is now a driver of the world’s economy. The impact is profound:
- Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
- Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
- Investment in carbon capture and storage technologies is increasingly rapidly.
- Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases.
On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”