PACTA Climate Test 2024

Every two years the Federal Office for the Environment FOEN, together with the State Secretariat for International Financial Matters SIF, carries out the Climate Test using the internationally recognised PACTA method. The aim is to determine what progress the Swiss financial market is making towards achieving climate protection targets. The PACTA Climate Test helps the financial sector to work towards the binding net-zero target 2050. The results of the 2024 test reveal that the majority of financial institutions have already established the net-zero target in their internal corporate strategy. However, many measures taken by financial institutions are not yet consistent with net zero.

In 2024 the FOEN and the State Secretariat for International Finance SIF will run the comprehensive PACTA climate test for the fourth time. The test analyses the climate compatibility of financial portfolios. PACTA stands for Paris Agreement Capital Transition Assessment. All Swiss banks, asset managers, pension funds and insurers were invited to have their portfolios tested, on a voluntary and anonymous basis.

The pension fund association ASIP, the Swiss Insurance Association SVV, the Bankers' Association SBA, the Asset Management Association Switzerland AMAS, Swiss Sustainable Finance SSF, the Association for Responsible Investments SVVK-ASIR and the Conference for Investment Foundations KGAST support the internationally coordinated climate compatibility tests.

The 2024 Climate Test

In 2024, 146 financial institutions voluntarily took part in the PACTA Climate Test, including 71 pension funds, 15 insurance companies, 34 banks and 26 asset managers. The number of participants increased in all financial sectors compared to the 2022 Climate Test, with the exception of insurance companies. More than three quarters of these also took part in the qualitative survey on climate-relevant measures. Financial institutes of various sizes from all sectors participated. The results are meaningful and comparable with the test results from 2022, 2020 and 2017 across the financial sector as a whole. This is the fourth time that Switzerland has conducted the PACTA test, making it a leading country in this field.

Progress since 2022

The 2024 Climate Test shows an increased awareness among financial institutions that they can and should make a real contribution to climate targets in their corporate activities. The net-zero target is also already reflected in the internal corporate strategies of over 60 per cent of participants. There are good practices in all asset classes:

In the asset class directly owned property, banks, pension funds and insurance companies are already on course to achieve their climate targets when looking at the industry average, at least with a view to 2030.
Mortgage lenders now use more climate incentives for their customers than in the 2022 Climate Test.
In the case of listed equity investments, around 60 per cent of all test participants stated that they practise credible climate stewardship. By exercising their voting rights and addressing climate issues, they exert influence on the companies in their portfolios with regard to climate matters.
Around 60 per cent of financial institutions do not hold corporate bonds in coal companies, which shows that the necessary move away from fossil fuels is taking place in this investment field.

Align efforts more consistently towards the net-zero target

However, the results also show that not all financial sectors and asset classes are yet geared towards the net-zero target. The majority of financial institutions must now draw up clear net-zero transition plans for all climate-relevant business activities and asset classes.

In order to meet 2050 climate targets, heating replacement, refurbishment and the expansion of photovoltaic systems are needed in buildings owned by the institutions themselves. There is also still no comprehensive and comparable environmental rating system for buildings.
On average, mortgage portfolios are not yet on course to achieve climate goals. More evidence is required to show which climate incentives actually encourage customers to make climate-friendly investments.
Oil production companies held in equity and corporate bond portfolios continue to expand their overall production capacities instead of turning away from fossil fuels. A third of financial institutions who claim to practise credible climate stewardship do not systematically vote in climate resolutions in favour of compatibility with a 2050 net-zero target. Where the dialogue with portfolio companies is outsourced to commercial or non-commercial providers, only half systematically discuss the net-zero target with the external asset manager.
Although the majority of financial institutions have set themselves a net-zero target, only in the case of 14 per cent of their equity and corporate bond portfolios do they state that they intend to align them with the climate target.

Communicating targets clearly not only for the company itself but also for each financial product boosts the credibility of the financial sector's efforts. With the Swiss Climate Scores now extended to all financial products from 2025, the Federal Council recommends that providers in the sector should voluntarily indicate whether or not they intend make their products climate-friendly.

The PACTA method

The regularly held tests are carried out using the PACTA method (Paris Agreement Capital Transition Assessment). This enables a standardised analysis for global equity, corporate bonds and credit portfolios. The underlying database covers around 250,000 industrial assets worldwide. On the following website you will find more information on the PACTA model, which is applied by the independent, international and non-profit organisation RMI. Used by numerous financial institutions and countries, it is available open source on the market:

The PACTA model

Switzerland offers an additional test for use by financial institutions that compares Swiss real estate and mortgage portfolios with the climate target for the domestic building stock. The PACTA real estate model was created for the FOEN and extended for the 2024 Climate Test. The Lucerne University of Applied Sciences and Arts has created a study which aims to validate the module for greenhouse gas emissions from building materials. The methodology report and the validation study can be found at the end of this webpage under > Documents. The extended real estate model is also available unlicensed on request. Please contact climate@bafu.admin.ch for the R-script.

Key information for financial institutions that took part in the 2024 PACTA Climate Test can also be found at the end of this webpage under > Documents (invitation, briefing note, templates).