A bank assesses lending portfolio alignment with various climate change scenarios. To assist in this process, the risk team applies the Paris Agreement Capital Transition Assessment (PACTA) tool to examine transition risk for power generation, automotive, and steel sectors. The team examines different PACTA metrics for each sector based on data availability and sectoral profile.
For sectors with no clear zero-carbon pathway, what metric will PACTA employ?
For sectors with no clear zero-carbon pathway, PACTA will employ the metric of emission intensity. This allows for a consistent measure of how much greenhouse gas is emitted per unit of output, providing a way to assess and compare the emissions performance of different entities within those sectors.
“ For sectors without clear decarbonization pathways as yet, such as steel and cement, the methodology instead uses the measure of emissions intensity. PACTA can com-pare the sector-specific emissions intensity of a particular bank’s loan book with emissions intensity aligned with climate scenarios”