PACTA Climate Test 2022: financial flows under scrutiny
The report on the PACTA climate compatibility tests published today once again provides information on the corresponding development of the Swiss financial sector. The Swiss Bankers Association welcomes the regular evaluation of the climate compatibility of financial flows, but at the same time also identifies potential for further development in the differentiated assessment of the alignment of financial flows with the Paris Climate Agreement.
The Federal Office for the Environment (FOEN) invited Swiss financial institutions to participate in the “PACTA Climate Test 2022”. The “Paris Agreement Capital Transition Assessment” aims to create comparable transparency across different financial sectors. The evaluation published today provides important insights for the Swiss financial sector. The SBA takes a positive view of the fact that the number of participants from banks remained the same as in the previous tests in 2020. Furthermore, the results show that different approaches cover a wide range of client requirements and that these approaches are actually put to use in practice. The SBA sees further development potential in the methods for differentiated assessment of climate alignment.
PACTA methodology and the “Swiss Climate Scores”
The PACTA climate compatibility tests are one of the methods that give banks, asset managers, insurance companies and pension funds an indicator to check the extent to which their portfolios are aligned with the goals of the Paris Climate Agreement on climate change. The aim is to establish how precisely portfolios are geared towards containing global warming to below two degrees Celsius. The “Swiss Climate Scores” have since been developed by the authorities and the industry, and aligned with the Glasgow Financial Alliance for Net Zero (GFANZ). They too pursue the goal of transparency with regard to the climate compatibility of financial flows, but supplement this even further with statements on the transition towards net zero, thereby increasing the significance of the effective impact. Consequently, the “Swiss Climate Scores” allow a more differentiated assessment of climate compatibility and are likely to play an important role in ensuring broader transparency of climate compatibility in the future. In the SBA’s view, the application of PACTA should also be brought more into line with the Swiss Climate Scores going forward. Blanket statements on the climate compatibility of the financial centre based on a single indicator, be it PACTA or another evaluation method, should be taken with caution. This is also the reason why the authorities, in association with the industry and NGOs, are introducing the more broadly based Swiss Climate Scores. These are based on internationally recognised methods and indicators and allow a differentiated assessment.
Banks are moving forward with a specific action plan
The current report shows that progress has been made, but further steps are important and necessary. The SBA clearly backs the Paris Climate Agreement and the implementation of the action plan developed with its members:
- Free self-regulations: by means of new self-regulations, the SBA defines a minimum standard for its members and strengthens competitiveness and credibility in this area by providing high-quality advice. More specifically, the SBA formulates binding guidelines for its members regarding advisory processes on the investment and financing side.
- Net-zero initiatives: the SBA considers net-zero initiatives to be effective instruments for achieving the 2050 climate targets. It advises its members to join international net-zero alliances as well as sustainability initiatives in the banking sector. Since 12 April 2022, the SBA itself has been a member of the Net-Zero Banking Alliance with supporter status.
- Education: the SBA and banks consistently integrate ESG competencies into education and training. The SBA has set itself the goal of ensuring that all client advisors have appropriate knowledge in the area of ESG and use this knowledge in the advisory process.
Financial service providers can use their services, financial products and client advice to make a significant contribution to sustainable development and effectively support the transition towards a more sustainable economy. At the same time, it should be emphasised that the results of tests and surveys on the current alignment of financial flows are always a reflection of the real economy, the real estate situation and the ESG preferences of clients.