What are the differences between Ortec Finance Climate Scenarios and NGFS Phase V scenarios?
As part of our ClimateMAPS – climate scenario analysis solution, financial institutions have the option to assess and quantify the potential financial and economic implications arising from climate change-related physical and transition risks from two either the Ortec Finance Climate Scenarios or NGFS Phase V climate scenarios.
The current Ortec Finance Climate Scenarios option translates seven climate scenarios and the NGFS option translates six of the Phase V climate scenarios into all asset classes and macroeconomic variables. The impacts on macroeconomic variables and returns from asset classes are presented relative to a reference baseline between 2°C to 3°C degrees warming.
How do Ortec Finance Climate Scenarios and NGFS Phase V Climate Scenarios differ?
| Ortec Finance Climate Scenarios | NGFS Phase V Climate Scenarios |
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Captures a wider range of transition risk narratives, including the impact of various regulatory and fiscal transition policies, as well as risks related to stranded assets. |
Transition risk proxied by a carbon price which omits the wide-ranging effects from policy implementation. |
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Effectively explores the effects of severe physical risks, including extreme weather events and climate tipping points. |
Limited physical risks are quantified, with only chronic and partial acute physical risks captured for financial markets. |
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Non-equilibrium macroeconomic modeling approach allows for positive transition effects in regions that are well-positioned to benefit from the transition. |
Equilibrium macroeconomic modeling approach does not reflect potential benefits of the transition. |
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Thoroughly comprehensive results provided by sector, region and asset class. |
Limited results by sector, region, and only covers impacts on equities. |
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Includes detailed narratives, interpretation notes and explanations for a greater understanding of results and implications. Enables users to understand how specific climate risk drivers are contributing to net impact. |
Very limited narratives or explanations of results. |
Which climate scenarios should financial institutions utilize?
Our Climate Scenarios & Sustainability team recommends financial institutions utilize the macroeconomic and asset class impacts generated from the Ortec Finance Climate Scenarios for stress testing, strategic asset allocation, investment strategy development and stakeholder engagement purposes as part of the investment decision process. The Ortec Finance Climate Scenarios are also able to meet a comprehensive range of reporting, disclosure and peer-benchmarking needs.
As an alternative option, the macroeconomic and asset class impacts from the NGFS Phase V climate scenarios can also be utilized to meet a range of financial institution’s reporting, disclosure and peer-benchmarking needs as part of their investment process.
Webinars
Webinar recording: Utilizing NGFS climate scenarios for climate risk analysis
Watch our webinar to learn how NGFS climate scenarios, have evolved from inception to the latest release and its benefits and limitations from an institutional investor perspective.
Watch our webinar to learn about NGFS’ inaugural release of short-term scenarios, designed to simulate the potential near-term impacts of climate policies and climate change on macroeconomies, sectors and the financial system.
Further insights
- Unlocking the true value of climate scenarios - Discover the differences between the various types of narrative-based climate scenarios.
- The latest release of NGFS climate scenarios - Key highlights for institutional investors – Learn more about the updates and changes within Phase V of the NGFS climate scenarios, and how it compares to its previous release.
- The fundamentals of climate scenario analysis for investors - Find out how climate scenario analysis can specifically help investors understand climate change's impact on investments.
About ClimateMAPS
Contact
Sophie Heald
Senior Climate Specialist
Bronwyn Claire
Senior Climate Specialist