Using scenario analysis to anticipate the risks and opportunities linked to the transition to a low-carbon economy
Climate change induces disruptions of our ecosystems, and the transition to a low-carbon economy significantly affects the political, economic and social landscapes. Businesses have to adapt to those changes, which entails risks and opportunities. Some changes are already visible today, but the deepest changes are expected to materialize over the mid to long term, and there is a lot of uncertainty around their timing and magnitude. In this context, the use of forward-looking scenarios is particularly useful to evaluate the resilience of a business to climate-related risks. For this reason, the use of scenarios is in particular recommended by the TCFD (Task-Force on Climate-related financial disclosures) set up by the Financial Stability Board, as well as the disclosure of these analyses to financial stakeholders.
I4CE joins the Reimagining disclosure project led by CDP to work on these issues.
This project is supported by Climate-KIC.
I4CE is involved in this project for the following tasks:
- The review of the information submitted by companies to CDP on their use of scenario analysis to evaluate their climate-related risks and opportunities
- The drafting of a pedagogic publication on climate-related scenarios to explain key concepts and provide a framework to interpret scenarios
- The analysis of the information needed by financial stakeholders to assess the vulnerability of their portfolio to transition risks, based on scenario analyses carried out by companies
- The review of the information currently disclosed by non-financial companies on their scenario analysis and the evaluation of the gap with information needed by financial stakeholders
- The elaboration of a “step-by-step” guide on how to carry out a scenario-based analysis of transition risks and opportunities for non-financial companies
- November 2017 to December 2019