Climate Change Scenario Analysis

From Open Risk Manual

Definition

Climate Change Scenario Analysis denotes a specific form of Scenario Analysis that organizations can use to identify, measure and mitigate Climate-Related Risk generated by Climate Change

Structure

Organizations should include scenario analysis as part of their strategic planning and/or enterprise risk management processes by:[1]

  • identifying and defining a range of scenarios, including a 2°C scenario, that provide a reasonable diversity of potential future climate states;
  • evaluating the potential resiliency of their strategic plans to the range of scenarios; and
  • using this assessment, identify options for increasing the organization’s strategic and business resiliency to plausible climate-related risks and opportunities through adjustments to strategic and financial plans.

Disclosure

Over time, organizations can improve disclosure through documenting:

  • management’s assessment of the resiliency of its strategic plans to climate change;
  • the range of scenarios used to inform management’s assessment, including key inputs, assumptions, and analytical methods and outputs (including potential business impacts and management responses to them); and the sensitivity of the results to key assumptions.

References

  1. TCDF 2018, Technical Supplement The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities

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