Pacta sunt servanda, which in Latin means „agreements must be respected“, is a brocade and a fundamental legal principle. The only limits to the application of pacta sunt servanda are the peremptory norms of general international law, called „jus cogens“, i.e. mandatory law. The legal principle of clausula rebus sic stantibus in customary international law also allows for non-compliance with contractual obligations due to mandatory changes in circumstances. 2 See 2DII: PACTA: Taking the Temperature of Financial Assets (last accessed September 9, 2020); available at the following address: 2degrees-investing.org/resource/pacta-taking-the-temperature-of-financial-assets (hereinafter „PACTA: Taking the Temperature“). 12 See 2DII: The PACTA methodology reaches new milestones (published on 29 July 2020); available at 2degrees-investing.org/pacta-methodology-hits-new-milestones/. 1 See resource 2DII (last accessed September 9, 2020); available at 2degrees-investing.org/resource/pacta/. Common law courts generally do not have the principle of good faith for commercial contracts; Therefore, with respect to the common law, it is inappropriate to say that Pacta sunt servanda contains the principle of good faith. [Citation needed] By providing banks with an overview of the climate orientation of their capital stock and the spending plans of their corporate clients, the PACTA for Banks toolkit represents a major step forward in climate scenario analysis for lenders. The toolkit was developed over a six-year period and tested by 17 global banks and more than a dozen academic institutions. 2DII provides the material free of charge to any interested organization. 2DII will host a webinar on October 13 to explain how PACTA for Banks works.
In the meantime, this article provides an overview of the most important features. Note on donors: The PACTA tool has been integrated into the European Union`s LIFE programme as part of the LIFE action grant No GIC/FR/00061 PACTA. It was also supported by the International Climate Initiative (IKI). The Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) supports this initiative on the basis of a resolution of the German Bundestag. This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended to be legal advice and should not be construed as legal advice. Financial institutions that wish to integrate PACTA for Banks into their lending decisions and climate risk analysis should consider the following steps: The figures below6 are examples of the type of issuance that users can see after using the PACTA climate scenario analysis tool. These figures come from an assessment of the investment portfolios of 672 insurers operating in California.7 The chart shows the alignment of corporate oil production in insurers` equity and fixed income portfolios (second chart) against the IEA`s temperature change scenarios at 2°C, 4°C and 6°C and against publicly traded global stock and bond markets. 2DII developed PACTA for Banks as a free public good in partnership with and with funding from a range of stakeholders from the banking, scientific and NGO sectors. Over the past two years, the toolkit has been tested by 17 major global banks in Europe, North and South America.
It was also reviewed by more than a dozen academic institutions and developed with input from NGOs and industry experts. . The second analytical component of the tool is a stress test module that allows the user to study the effects of various parameters on alignment, for example. B by modifying the scenarios and regions of the analysis. This analytical component „includes a calculation of potential losses under climate stress test scenarios, taking into account physical, legal and transition risks“. 8 Physical risks are related to the physical effects of climate change and could include gradual changes such as sea level rise or coastal erosion, as well as acute weather events such as forest fires or floods. Legal risks would include the adoption of measures to reduce greenhouse gas emissions or risks that could arise depending on climate disputes. Finally, transition risks include uncertainty in technological development and use in climate-related sectors, such as . B the increase in the production of electric vehicles. PACTA for investment portfolios (available since 2018) In September 2020, 2DII also launched PACTA for Banks, a free open source toolkit for climate scenario analysis for corporate loan portfolios.
Developed with input from leading global banks, universities and NGOs, PACTA for Banks enables users to measure the alignment of their corporate loan portfolios with climate scenarios in key climate-related sectors and technologies. Maarten Vleeschhouwer, Head of PACTA at the 2C Investing Initiative, said: „PACTA for Banks is an important step in our efforts to mobilise the banking and financial sector in the fight against climate change. It is available free of charge to any bank worldwide and allows users to measure the alignment of their loan portfolios in key climate-related sectors, make decisions on setting climate goals and develop more sophisticated climate protection strategies. In September 2018, we introduced the PACTA (Paris Agreement Capital Transition Assessment) tool: a free software that calculates the degree of capital consumption of companies. Read more > Jan Raes, Global Sustainability Advisor at Dutch bank ABN AMRO Bank, welcomed the launch of the new toolkit. „ABN AMRO is committed to contributing to the goals of the Paris Agreement and has begun measuring and reporting to enable portfolio management in line with the Paris Agreement,“ he said. .