Economic Scenarios for Climate Risk

Climate risk scenarios based on the Network for Greening the Financial System’s Phase II guidance.

Climate change will affect economies through physical risks such as rising sea levels, and transition risks such as higher energy costs and changes in energy consumption. As the threats from climate change mount, businesses are focusing on quantifying what these physical and transition risks mean for them.

Offering

Using the Moody’s Analytics Global Macroeconomic Model, we have produced a set of climate risk scenarios consistent with the NGFS Phase II framework. Moody’s Analytics Climate Risk Scenarios provide four alternative pathways forecasting the physical and transition risks to the economy for more than 70 countries and 18,000 macroeconomic variables. The expansive scope of climate-related macroeconomic data allows organizations to analyze business impacts and stress their portfolios for the risks posed by climate change.

Key Features

  • Available for more than 70 countries.
  • Additional climate-specific macroeconomic data for 20+ countries.
  • Fully documented model methodology.
  • High-frequency forecasts with a 30-year horizon.
  • Bi-annual updates.
  • Flexible delivery options, including API.
  • Customizable scenario paths using our Scenario Studio platform.

Methodology

Moody’s Analytics starts with the NGFS parameters for top-line variables, then expands the scenarios to extrapolate additional variables using our Global Macroeconomic Model. A key to incorporating climate risk into traditional macroeconomic variables is including the trajectory for carbon prices. Carbon prices flow through the model through price channels, raising inflation rates and factoring into central banks’ reaction functions. As governments increasingly adopt carbon tax policies to limit the amount of carbon dioxide in the atmosphere, some industries are affected more adversely than others. These industrial transition risks are reflected in the forecasts produced by the Global Macroeconomic Model. Learn More.