The Climate Policy Relevant Sectors (CPRS) is a classification of economic activities to assess transition risk, developed in Battiston et al. (2017) and refined over the years.
Assessing transition risk requires to go beyond the notion of stranded assets, which only looks at the losses (and not at the potential gains) and lacks a precise definition. It is key to use a classification that is replicable and comparable across portfolios and jurisdictions. The CPRS methodology allows to address this challenge and it is also fully compatible with the EU Taxonomy for the sustainable activities.
CPRS provide a standardized and actionable classification of activities (at the NACE Rev2, 4-digit level1) whose revenues could be affected positively or negatively in a disorderly low-carbon transition, based on their energy technology (e.g. based on fossil fuel or renewable energy). For this reason, the CPRS classification is regarded as a reference for climate financial risk assessment and has been used by several international financial institutions to assess investors’ exposure to climate transition risk (see below).
In simple terms, CPRS are economic activities that could be affected, either positively or negatively (including "stranded assets") in a disorderly low-carbon transition. As such, they allow to consider the economic and financial risk stemming from the (mis)alignment to the climate and decarbonization targets of firms and sectors (recorded at the NACE 4-digit level) that contribute to the Gross Value Added (GVA). CPRS include fossil fuel, utility, energy intensive, buildings, transportation, agriculture, identified considering (i) the direct and indirect contribution to GHG emissions; (ii) their relevance for climate policy implementation (i.e. their costs sensitivity to climate policy change, e.g. the EU carbon leakage directive 2003/87/EC); (iii) their role in the energy value chain.
NOTE: CPRS comprise several levels of granularity. The most aggregate level is denoted as CPRS Main (see Table below). CPRS2 is more granular but remains at the level of NACE4digit (each NACE4 corresponds to only one CPRS2). We developed also further levels of granularity, which will be available here soon.
Updated on Feb 3, 2021.
|05, 06, 08.92, 09.10, 19, 35.2, 46.71, 47.3, 49.5|
|35.11, 35.12, 35.13|
|07.1, 07.29, 08.9, 08.93, 08.99, 10.2, 10.41, 10.62, 10.81, 10.86, 11.01, 11.02, 11.04, 11.06, 13, 14, 15, 16.29, 17.11, 17.12, 17.24, 20.12, 20.13, 20.14, 20.15, 20.16, 20.17, 20.2, 20.42, 20.53, 20.59, 20.6, 21, 22.1, 23.1, 23.2, 23.3, 23.4, 23.5, 23.7, 23.91, 24.1, 24.2, 24.31, 24.4, 24.51, 24.53, 25.4, 25.7, 25.94, 25.99, 26, 27, 28, 32|
|23.6, 41.1, 41.2, 43.3, 43.9, 55, 68, 71.1|
|29, 30, 33.15, 33.16, 33.17, 42.1, 45, 49.1, 49.2, 49.3, 49.4, 50, 51, 52, 53, 77.1, 77.35|
|6-agriculture||01, 02, 03|
Note that where a 2-digits (or 3-digits) NACE code is indicated, this means that all the 4-digits NACE codes contained in that code are mapped into the same CPRS.
Reference to the work where CPRS where introduced
Battiston, S., Mandel, A., Monasterolo, I., Schütze, F., Visentin, G., Mandel, Antoine Monasterolo, I., … Visentin, G. (2017). A Climate stress-test of the financial system. Nature Climate Change, 7(4), 283–288. https://doi.org/doi:10.1038/nclimate3255
Reports of policy makers using CPRS
• The European Central Bank (ECB) reported in its Financial Stability Report of June 2019 some preliminary estimates of aggregate exposures of financial institutions to CPRS relative to their total debt securities holdings, as ranging between 1% for banks to about 9% for investment funds (ECB, 2019).
• The European Insurance and Occupational Pensions Authority (EIOPA) reported aggregate exposures to CPRS of EU insurance companies at about 13% of their total securities holdings (EIOPA, 2018).
• The European Banking Authority, in its Financial Risk Assessment of the Banking System of December 2020, has used the CPRS methodology to analyse the transition risk of a universe of 2.4 trillion euros of loans of EU banks (EBA 2020, page 29).
Joint works with financial supervisors on climate transition risk that use CPRS
• Battiston, S., Guth, M., Monasterolo, I., Neudorfer, B., & Pointner, W. (2020). Austrian banks’ exposure to climate-related transition risk. Austrian National Bank Financial Stability Report, 40, 31–44.
• Battiston, Stefano, et al. “Climate Risk Assessment of Sovereign Bonds’ Portfolio of European Insurers.” EIOPA Financial Stability Review, 2019.
• Monasterolo, Irene, and Stefano Battiston. “Assessing Forward-Looking Climate Risks in Financial Portfolios: A Science-Based Approach for Investors and Supervisors.” NGFS Occasional Paper. Case Studies of Environmental Risk Analysis Methodologies., 2020, pp. 52–72. (PDF, 4 MB)