Overview

This cookbook provides a step-by-step guide to running the PACTA for Banks analysis using the pacta.loanbook R package. The analysis determines alignment with climate scenarios to infer progress toward the Paris Agreement goals. If you’re new to climate scenario alignment and PACTA, see the PACTA website for more information about PACTA for Banks, more on PACTA methodology, and other PACTA applications.

The cookbook is structured as follows:

Preparatory Steps: Prepare the loanbook, ABCD and scenario input datasets.
Running the Analysis: Match the raw loanbooks to the ABCD data and run the PACTA for Banks analysis.
Interpretation of Results: Understand the analysis outputs.
Advanced Topics: Guidance on advanced research questions.
Metrics: More detailed explanations and formulae of the key metrics.

What is the PACTA for Banks analysis?

PACTA for Banks applies the PACTA methodology to assess corporate lending portfolios’ alignment with climate goals. It uses forward-looking asset-based company data (ABCD) linked to financial assets to compare companies’ production profiles with sector- and technology-level climate transition scenarios.

Who are these tools for?

PACTA for Banks is primarily designed for banks to run independently with no or limited support from RMI. However, it can also be useful for others interested in conducting a transition assessment on their loan books.

How can the results be used?

Banks can use the analysis results to:

Assess loan book alignment to climate scenarios.
Identify sectors that need action to improve alignment.
Screen for climate-related transition risks.
Spot opportunities for climate-aligned investments.
Detect counter-parties exposed to transition risks for risk management.

The results include both tabular outputs and visualizations. Tabular data can be further processed in financial risk models or integrated into internal monitoring systems.

What are the main steps of the analysis?

The main steps of the analysis are as follows:

Data preparation: Prepare the loan book, ABCD and Scenario input data.
Matching: Match the raw loan book to the ABCD data.
Match prioritization: Prioritize the matched loan book and analyze its coverage.
Running the analysis: Execute PACTA for Banks and generate visualizations.

This cookbook provides detailed guidance on each step, including required inputs, software, and result interpretation.

NEXT CHAPTER: Preparatory Steps