Developing climate scenarios for the financial system

Climate change presents a novel form of financial risk. Central banks and financial supervisors have needed to equip themselves with innovative methods to manage the deep uncertainty, complex non-linearity, and endogeneity of climate change. Through our commissions, funding, and partnerships, INSPIRE has been instrumental in the process of developing and delivering forward-looking climate scenarios.

At the request of the NGFS workstream on macrofinancial, we have funded the development of the NGFS climate scenarios which draw upon the expertise of an academic consortium that includes:the Potsdam Institute for Climate Impact Research, the International Institute for Applied Systems Analysis, the Center for Global Sustainability at the University of Maryland, Climate Analytics, the Swiss Federal Institute of Technology in Zurich and the National Institute of Economic and Social Research.

In addition to supporting the development of the NGFS scenarios, we also commission independent research to increase the awareness and understanding of financial institutions for transition trajectories and systemic risk.

Sarah Breeden - chair of the NGFS Workstream on Macrofinancial and executive director at the Bank of England.
“Climate scenarios are a crucial tool in assessing the risks of the future, but they are so much more, because when we better understand the risks of tomorrow, we take more informed action today, and in so doing support an orderly transition to net-zero.”