Ortec Finance, the leading provider of technology and solutions for risk and return management for financial institutions, in partnership with Cambridge Econometrics has released its 2023 standard climate scenario set. The latest release consists of key updates to the previous three climate scenarios released in 2022 and includes a new additional fourth scenario.These scenarios are a key component of Ortec Finance’s ClimateMAPS climate scenario analysis solution, which identifies investment portfolio climate risk and opportunities to generate forward-looking risk return analytics. The three updated scenarios have been renamed as ‘Net-zero’, ‘Net-zero financial crisis’, ‘High-warming’, and the new fourth scenario is called ‘Limited action’.
Limited action explores scaled-down government transition policies that leads to larger physical impacts. This new scenario is based on ‘intermediate emissions’ and an average global warming temperature of 2.8°C.
Both the updated ‘Net-zero’ and ‘Net-zero financial crisis’ scenarios reflects stronger short-term impacts, an indication of the diminishing timeframe faced by the world to reach net-zero by 2050.
All four scenarios include the latest macro-economic, market and scientific data and further explores the implications arising from key policy levers and physical risk impacts. All the scenarios have been updated to include models recently announced polices from key economies including China, the United States of America, United Kingdom, Canada and the 27 countries that form the European Union. The scenarios cover a wide range of asset classes including fixed income, corporate credit, equities, real assets, alternatives, commodities, and currencies. Green and ESG bonds – both sovereign and corporate is now also covered by ClimateMAPS.
ClimateMAPS is independent and distinctive, offers comprehensive risk coverage, and is customizable to client specific assumptions.
Willemijn Verdegaal, Managing Director Climate & ESG Solutions, Ortec Finance said: “We are pleased to release the latest set of climate scenarios, which continue to reflect Ortec Finance’s independent views and assumptions. Our standard sets, now in their sixth update since its initial release in February 2021, continue to demonstrate innovation in modeling from our team of climate experts and our strategic partner, Cambridge Econometrics. These scenarios also reflect the rapidly evolving and emerging climate-related policy changes from key economies and updated economic projections.”
Lisa Eichler, Managing Director Climate & ESG Solutions, Ortec Finance, added: “We are firmly committed to supporting financial institutions around the world with integrating climate risk and opportunities into their investment decision-making by providing insights in the form of quantified metrics analytics supplemented with qualitative narratives. These climate-related insights aim to support a financial institutions’ long-term decision making within an investment process.
Climate scenarios are not a forecasting tool and do not necessarily represent the most likely future outcomes or a comprehensive set of possible outcomes. Rather, they enable a structured exploration of a range of plausible future outcomes that can help build understanding of how certain climate-related financial risks could manifest for financial institutions and their investment portfolios in the future, and how these risks may differ from the past.”
About Climate & ESG Solutions
Ortec Finance’s Climate & ESG Solutions offers The Compass alongside hands-on expertise to enable investors to effectively integrate climate risks and opportunities into their investment decision-making. Comprising of ClimateALIGN, ClimateMAPS, ClimatePREDICT and ClimateSIGNS, The Compass generates quantified metrics and insights through independent and research-based climate knowledge, advanced models and innovative technology. Its customizable analytics help financial institutions measure, manage and monitor their climate strategy.
About Cambridge Econometrics
Cambridge Econometrics is an award-winning economics consultancy based in Cambridge (UK), Brussels, Budapest and Northampton, Massachusetts. Their globally recognised macroeconomic model E3ME underpins its rigorous and independent approach to helping clients make evidence-based investment and policy decisions with confidence, providing clear, intelligent and actionable insights. E3ME fuels Cambridge Econometric’s strategic partnership with Ortec Finance through simulating interactions and dynamics of the economy for climate scenario analysis, testing the impact of different global temperature pathways and assessing the impact of physical and transitional climate-related risks.