Demystifying Climate Scenario Analysis for Financial Stakeholders

As scenario analysis methodologies for transition risk have become an emerging practice, physical risk and it’s financial implications must be considered. While transition risk considers policy developments and greenhouse gas emissions targets, physical risks are now part of risk pathways which must be captured in scenario analysis. Percentile-based scenario analysis offers an effective, data-driven approach, suitable for loan-level, product-set and portfolio-level analytics, reporting and necessary engagement with financial market participants.