Enhancing TCFD Climate Risk Assessments: Scenario analysis, tools & recs

Presented by

UNEP FI | CICERO

About this talk

UNEP FI's TCFD programme is launching 3 new papers in February 2021 relating to scenario analysis, recommendations on integrated assessment models, tools, the changing regulatory landscape as well as potential developments in 2021. Decarbonization and Disruption: Understanding the financial risks of a disorderly transition using climate scenarios 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) Pathways to Paris: A practical guide to climate transition scenarios for financial professionals is a detailed guide, in partnership with CICERO, for financial sector practitioners looking to understand and apply climate scenarios in a financial risk context. Readers will gain insights into the key assumptions and sectoral coverage of the Integrated Assessment Models (IAMs) used to produce climate scenarios, as well as the benefits and limitations of using IAM-generated transition pathways. Finally, this paper provides a series of recommendations for enhancing the development and application of IAMs by financial institutions based on perspectives of participating banks that used UNEP FI’s transition risk methodology. The Climate Risk Landscape: Mapping Climate-related Financial Risk Assessment Methodologies provides a summary of the key developments across third party climate risk assessment providers since May 2019, including new and updated scenarios, methodological tools, key guidelines, as well as an overview of the changing regulatory landscape and potential developments into 2021.

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United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between United Nations Environment and the global financial sector created in the wake of the 1992 Earth Summit with a mission to promote sustainable finance. More than 240 financial institutions, including banks, insurers, and investors, work with UN Environment to understand today’s environmental, social and governance challenges, why they matter to finance, and how to actively participate in addressing them. UNEP FI’s work also includes a strong focus on policy – by facilitating country-level dialogues between finance practitioners, supervisors, regulators and policy-makers, and, at the international level, by promoting financial sector involvement in processes such as the global climate negotiations.