Climate change - of about 1°C of warming today relative to pre-industrial times - is already having disruptive effects on economies across the globe, through both its physical manifestations and the mitigation actions aimed at avoiding these. Continued physical climate change and rapid policy action to limit it present investors with potentially unprecedented and uncertain financial impacts that they will need to manage.
The recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) outline the need for corporate and financial institutions to conduct forward-looking scenario-based assessments of these climate-related risks and opportunities. This report, Changing Course: A comprehensive investor guide to scenario-based methods for climate risk assessment, in response to the TCFD, details the results of the UN Environment Programme Finance Initiative (UNEP FI) Investor Pilot on TCFD Adoption, a collaborative effort to explore, enhance and apply a methodology for assessing the impact of physical and transition risks and opportunities on the portfolios of institutional investors. The report presents the methodology enhanced and used by the Investor Pilot Group in collaboration with the data analytics firm Carbon Delta. In addition, the report offers a ‘landscape review’ of other providers’ methodologies for climate-related scenario analysis.