PACTA (Paris Agreement Capital Transition Assessment)

PACTA, short for Paris Agreement Capital Transition Assessment, is the alignment methodology built by the 2° Investing Initiative (2DII), and RMI has maintained its open-source software since June 2022. Rather than reported emissions, it starts from physical assets, power plants, mines, wells, car plants, blast furnaces, with their five-year production plans, and traces that capacity back to the issuers of the stocks and bonds held. Sector by sector, it then compares the portfolio's technology mix (renewables versus coal in power, electric versus internal combustion in autos) with what a transition scenario requires, most often those of the IEA. The output reads in mix percentage points or production volumes, not in degrees. Switzerland turned it into a market-wide test. The Federal Office for the Environment and the State Secretariat for International Finance launched it in 2017 with 79 pension funds and insurers, about two thirds of the market by assets under management, then repeated it in 2020, 2022 and 2024. In 2022, 133 institutions took part, 20 insurers among them; in 2024, 146 institutions took part, but only 15 insurers. The California Department of Insurance picked up the same tool in 2018: 2DII ran it on the 672 insurers writing more than 100 million dollars of premiums in that market, close to 4,300 billion dollars of investments, and found more than 500 billion in fossil fuel related securities, 10.5 billion of it in thermal coal. The method has blind spots. It works well for sectors where one technology replaces another, much less for finance or services, and five years of capital expenditure plans say little about a pathway to 2050.