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Investors offered tool to measure climate risk

Investors will be able to gauge climate risk in their portfolio if global temperatures continue to rise


David Robinson

The United Nations’ Principles for Responsible Investment (PRI) is supporting the launch of a new investor tool that analyses the climate risk of equity and fixed income assets in a portfolio.

The Paris Agreement Capital Transition Assessment (PACTA) tool has been developed with the climate thinktank, the 2° Investing Initiative. The tool calculates climate transition risk in portfolios, allowing investors to see the existing climate risk in their portfolio and how this might change if global temperatures continue to rise.

An earlier version of this tool has been used by around 250 investors and four regulators – the Swiss financial regulator, the California Insurance Commission and the Dutch Central Bank.

Outputs from the tool can be downloaded into a 30-page report, which includes an analysis of how a global increase in temperature by 2 degrees will impact assets, sectors and regions.

“The PRI anticipates that this tool will help reduce information barriers for investors on how climate scenario analysis could be done,” Fiona Reynolds, chief executive officer of the PRI, said in a statement.

“The launch of this tool, as well as solutions offered by other service providers, means there are even fewer reasons for investors not to get started.”

Stan Dupré, CEO and founder of the 2° Investing Initiative, added: “We developed the PACTA tool to enable investors to conduct climate change scenario-based analysis of their portfolios. It can help them comply with the TCFD recommendations, French Article 173 and the upcoming disclosure requirements at the EU level – at no cost.

“The PACTA tool also fosters comparability between portfolios in the absence of a reporting standard on metrics. This is what makes it attractive to financial supervisors… and governmental authorities.”

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