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.