Resource Database

Climate-driven extreme weather events and the transition to a low-carbon economy are expected to have material impacts on companies, with increasing significance for credit analysis. However, both physical and transition risks have a wide range of potential outcomes. In its new report, Climate scenarios vital to assess credit impact of carbon transition, physical risks, Moody’s Investors Service describes a conceptual approach to scenario analysis, leveraging Four Twenty Seven’s methodology for physical risks.

The transition risk approach is to explore sector-specific credit implications for two IEA emissions scenarios. For physical risk scenarios Moody’s will use data from Four Twenty Seven to provide a uniform starting point from which to explore the range of credit implications of different climate hazards across sectors. Since the climate takes years to fully respond to greenhouse gases in the atmosphere, in the near-term the uncertainty in physical outcomes is not driven by policy changes, but rather by scientific uncertainty within the climate models. By grouping the outcomes of climate models within a single RCP into low, medium and high tiers one can explore the range of potential severity in climate hazards such as extreme temperature and precipitation.

This special report by IEA, part of the World Energy Outlook series, assesses the effect of recent low-carbon energy developments and the INDCs proposed thus far. This report also proposes the adoption of five measures that would achieve a near-term peak in global energy-related emissions while maintaining momentum for stronger national efforts.

Resources for the Future (RFF) sta! utilized a suite of models to estimate the projected energy-related carbon dioxide emissions reductions under di!erent climate policy proposals, including alternative carbon fee scenarios.

This report updates and expands CDP’s research and League Table for the global automobile original equipment manufacturers (OEMs), first published in February 2015 and again in March 2016. It ranks 16 of the largest publicly listed automotive companies on business readiness for a low-carbon transition. The areas assessed in the CDP League Table are aligned with the TCFD recommendations.

This report updates CDP’s research and League Table for diversified miners, first published in November 2015. It ranks 12 of the largest publicly listed diversified miners (by market capitalization) on business readiness for a low-carbon economy transition. The areas assessed in the CDP League Table are aligned with the TCFD recommendations.

Scenario analysis is an essential yet challenging component of TCFD disclosure and of understanding and preparing for the impacts of climate change on assets, markets and economies. Many climate impacts are already locked in to mid-century, so when focusing on the next few decades scenario analysis should focus on the scientific phenomenon driving uncertainty, rather than the climate policies which have a greater impact over the longer term. This report, Demystifying Climate Scenario Analysis for Financial Stakeholders, explores which impacts are already locked in, identifies how Representative Concentration Pathway (RCP) scenarios fit into the conversation, and describes an approach to setting up scenario analysis for near-term physical climate risks.

Our atmosphere will continue to warm for many decades even if we stop emitting carbon dioxide tomorrow. The oceans will continue to rise, heat waves will become more severe and droughts will intensify. . This report outlines an approach called percentile-based analysis, which allows users to explore the range of potential outcomes based on climate model outputs within a single RCP.

The Deep Decarbonization Pathways Project (DDPP) is a global collaboration of energy research teams charting practical pathways to deeply reducing greenhouse gas emissions in their own countries. The initial results of this collaboration are reflected in reports on deep decarbonization pathways for Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan Mexico, Russia, South Africa, South Korea, United Kingdom and United States.

This paper covers two primary themes of relevance to financial institutions, with support from Oliver Wyman. First, it examines sector specific risk drivers that could result in a disorderly transition, making the argument that climate transition risk is a significant near-term threat to much of the economy. Second, the report explored how these risk drivers are currently being modeled in climate scenarios produced by major integrated assessment models (IAMs). The paper also includes bank case studies that affirm greater economic risks associated with disorderly transition scenarios compared with orderly transition scenarios.

With many emerging markets highly exposed to climate-related risks, the response of private companies in vulnerable regions is not only instrumental to tackling the climate emergency but also essential to building robust and resilient economies.  Despite this, many corporations operating in these geographies do not yet sufficiently consider their exposure to risks from the physical impacts of climate change and those arising from the transition to low-carbon economies when making business and investment decisions.

A previous FT Digital Dialogue compared climate-related financial disclosure levels in emerging and developed markets and how any disclosure gap is likely to affect emerging market corporates’ access to capital.  This event, organised in partnership with the European Bank for Reconstruction and Development (EBRD), focused on the practical steps companies in emerging markets could take to manage climate risks and identify new business opportunities. How can organisations best integrate key climate-related risk strategies and strengthen climate-related financial management and disclosure? What progress has been made in emerging markets and in which key ways can comprehensive climate-related financial management and disclosure be a competitive advantage when accessing capital?

This suite of scientific factsheets aim to build financial decision-makers’ understanding about physical climate risk assessment, data needs, climate modeling and extreme events.

It is made in the framework of the research project ClimINVEST that is aimed at improving understanding of physical climate risk. ClimINVEST brings climate scientists and investors together to provide transparency on methodologies for physical climate risk assessment and develop guidance tools that inform investors’ risk management processes.

The suite of scientific factsheets are such guidance tools and they are evaluated by a selected group of financial actors prior to publishing.

This presentation series aimed at providing guidance for the financial sector dives into climate hazards and case studies on physical climate risk.

ClimINVEST is a research project aimed to improve the understanding of physical climate risk. It brings climate scientists and investors together to provide transparency on methodologies for physical climate risk assessment and develop guidance tools that inform investors’ risk management processes.

We aimed to answer the following questions: What information is available for investors? How can investors better secure the value of their portfolios against physical climate risk? Which risks require immediate attention from investors?

CDP has produced a discussion paper for organizations to ensure their business model aligns with a net-zero economy. The high-level summary reviews and reflects the thinking drawn from other existing frameworks and related benchmarks, such as the Assessing the Low-Carbon Transition (ACT) framework, Science-Based Targets Initiative, Transition Pathways Initiative (TPI), CA100+ and the Climate Safe Lending Network.

First published: November 2021