Scenario analysis

The Network for Greening the Financial System (NGFS) has released a note examining the synergies between climate scenario analysis and transition planning. It highlights how scenario analysis can guide strategic decision-making and risk mitigation, while transition plans can provide valuable insights for designing and applying climate scenarios.

In an online workshop, Chapter Zero and the Climate Governance Initiative explored the critical role of climate scenario analysis and planning for financial sector boards. The big question for the participants was: what does performing these exercises – to understand the future impact of climate on business – mean for boards; and what questions should non-executive directors (NEDs) ask?

On 2 October 2024, global non-executive directors participated in the Climate Scenario Game: Nature Risk in the Boardroom, a webinar organised by Chapter Zero, the Climate Governance Initiative and GARP Risk Institute. Attendees acted as the board of a fictional company, voting on critical decisions for four future dilemmas over the next six years. Expert panellists provided insights into the decision-making process and outcomes. This immersive exercise highlighted the urgency of addressing nature risks, equipping participants to tackle policy, legal, market, and reputational challenges within their own organisations.

TCFD guidance on scenario analysis.

Scenario models have formed a substantive part of managing financial risk for years. WTW look at how climate impacts – and transition - bring new subtleties to the way organizations and governments understand and use them.

To support financial firms in developing their climate-scenario analysis capabilities, the Climate Financial Risk Forum (CFRF) has issued a guide to help institutions identify their specific training needs related to physical climate risks and to implement effective plans for addressing them.

The Climate Financial Risk Forum (CFRF) has released a paper featuring nine case studies that quantify the financial impacts of various climate scenarios. The publication is designed to help financial professionals better assess and manage climate-related financial risks while aligning with evolving regulatory expectations.

In this three-part series on climate scenario analysis, KPMG examines banks and other financial institutions’ end-to-end climate risk scenario analysis models.