ERAFP uses climate scenario analysis to estimate the anticipated value of a portfolio under specific conditions and for various time horizons. The aim of this analysis is to assess a portfolio's behaviour under several configurations of risks and opportunities and, particularly, to test under extreme conditions. In this context, ERAFP chose to use different reference scenarios adopted by the IPCC and IEA, two credible and internationally recognised organisations.
The results of the physical and transition risk analyses are published for the first time in ERAFP's 2019 annual report.
Since 2017, ERAFP has also measured its portfolio's alignment with a 2°C scenario. In 2020, ERAFP has extended this 2°C alignment assessment to all business sectors for its listed companies portfolios. ERAFP does this by using the Sector Decarbonisation Approach (SDA) for sectors with homogeneous activities and the GHG Emissions per Value Added Approach (GEVA) for sectors with heterogeneous activities.
Since 2018, the results have been published in ERAFP's annual report. While some sectors, such as electricity producers, are already in alignment with a 2°C scenario for the listed companies portfolio, other sectors still need to make substantial efforts.
This enables us to identify the issuers presenting the highest number of climate-related risks or opportunities and thus to prioritise engagement actions to be taken by ERAFP or its asset managers