The Network for Greening the Financial System (NGFS) has published updated climate scenarios for central banks and supervisors.
As well as including the nationally determined contributions announced by countries ahead of COP26, the scenarios also include potential losses from extreme weather events and specific impacts of “chronic climate changes” on the macroeconomy.
They do not, however, account for the consequences of Russia’s invasion of Ukraine and the current energy crisis, due to “the lead time required for [the scenarios’] completion” – although the scenarios “remain informative” by illustrating the challenges, feasibility and benefits of continuing to transition to net zero with this situation ongoing, NGFS said.
The new scenarios have been published alongside a ‘Climate Scenarios Sensitivity Analysis to Macroeconomic Policy Assumptions‘ and ‘Practical Lessons for the Development of Climate Scenarios with Extreme Weather Events from Emerging Markets and Developing Economies‘.
Ravi Menon, Chair of the NGFS and Managing Director of the Monetary Authority of Singapore, said: “Recent events have underscored that both climate change and energy transition are already happening.”
“The droughts in Europe and China and the floods in Pakistan and India are tangible demonstrations of the devastating effects of climate change. The spike in fossil energy prices arising from the war in Ukraine is an early indication of what a disorderly energy transition might look like.”
“The NGFS will continue to fine-tune the climate scenarios to allow for more comprehensive and relevant applications, support more comparable climate related disclosures, and enable climate-resilient business and risk decisions.”
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