Guide to climate scenario analysis for central banks and ...

Network for Greening the Financial System Technical documentGuide to climate scenario analysisfor central banks and supervisorsJune 2020 NGFS REPORT1 climate change, and our response to it, will have a significant impact on economic and financial systems. The impacts will be far-reaching in breadth and in magnitude; subject to tipping points and irreversible changes; and are uncertain yet at the same time totally foreseeable. In particular, while we do not know now exactly what physical and transition risks will materialise, we do know for sure that we will face some combination of those risks. And, crucially, we also know that the size and balance of these future financial risks and economic costs will depend on the actions we take we act now, then we maximise our chances of achieving an orderly transition to a carbon neutral economy. By acting early we minimise transition risks, and by limiting global warming to a range of C to C relative to pre-industrial levels, we simultaneously minimise the extent to which the physical risks from climate change materialise.

is obtaining granular enough information on how the scenario would affect economic activity to assess the financial risks. Step 4 Communicating and using results. Communicating the results, and the key assumptions underpinning them, will help increase awareness. This may provide a basis for follow-up actions from central banks and supervisors

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