Climate Scenario Analysis

What is Climate Scenario Analysis?

Scenario analysis is an essential tool for understanding the implications of climate change for your business. Climate scenarios are a way to represent a plausible future climate based on human impact and subsequent greenhouse gas emissions. These scenarios help us construct climate change analyses based on alternative, plausible futures. We have adopted four of the IPCC AR5 representative concentration pathway scenarios (RCP) for use in our analyses. You can read more about the RCP emissions scenarios here.

The Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) is a “market-driven initiative, set up to develop a set of recommendations for voluntary and consistent climate-related financial risk disclosures in mainstream filings.” Conducting a climate scenario analysis is a critical step to TCFD reporting that feeds into four of the eleven TCFD disclosures:

1) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.

2) Describe the impact of climate related risks and opportunities on the organization’s businesses, strategy, and financial planning.

3) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.

4) Describe the organization’s processes for identifying and assessing climate-related risks.

Physical vs. Transitional Risks

Physical Risks is defined as the physical impact of changing weather due to climate change. This includes, but is not limited to, temperature change, extreme storms, rising sea level, flooding, and precipitation. 

Transitional Risks focus on policy and legal changes, market and technology shifts, and changing consumer expectations.

 

 

What We Offer

ClimaTrends brings deep expertise in climate, weather, and sustainability. We will work with companies to conduct a climate scenario analysis of the physical and transitional risks associated with their business. This report will be used to understand, assess, and report on the company’s strategy as it relates to climate-related risks and opportunities.

Companies’ assessments of their strategies should take into account a range of different plausible future climate states, including a transition to a lower-carbon economy consistent with a 2°C or lower scenario and, where relevant to the company, scenarios consistent with increased physical climate-related risks.

We work with companies to:

  1. Establish Scope
  2. Acquire relevant data
  3. Analyze Physical & Transitional Risks
  4. Develop Scenarios
  5. Create a Climate Scenario Analysis Work Session
  6. Deliver a Final Report

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