What is PACTA?

The Paris Agreement Capital Transition Assessment (PACTA) is a climate scenario analysis methodology. It measures the alignment of financial portfolios to climate change scenarios, including Paris aligned scenarios, across climate critical sectors. PACTA is aimed at informing transition risk with the ultimate goal of driving emissions reductions in the real economy.

PACTA bases its assessment of portfolio alignment to a climate scenario on forward-looking production values, which are measured in economic units of output in the real economy. It is thus distinguished from purely carbon accounting frameworks, which are often based on historic data. Despite this distinction, PACTA can be used as an input into carbon accounting frameworks, with the use of emission factor models, and can complement such frameworks in their own right.

PACTA is an open source iterative methodology. Designed in consortium with academic institutions, industry initiatives, not for profits and financial. It has received funding from the EU Life Programme, International Climate Initiative (IKI) and Germany's Federal Ministry for the Environment, Nature Conservation and Nuclear Safety.

On the Transition Monitor website, individual users can perform PACTA analysis for listed equities and corporate bonds using free, online software here. The website also hosts materials for a bank wishing to run the PACTA analysis on their corporate lending portfolios. This can be accessed at the PACTA for Banks tab. This methodology was road tested in consortium with 18 major international banks.

Since the tool was launched on TransitionMonitor.org, more than 3,000 individuals from over 1,500 institutions have used it to conduct over 10,000 tests.

Transition risks are risks generated by the policy, technology, market, and regulatory changes likely to accompany the transition to a low carbon economy.