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][2]
- identifying and defining a range of scenarios, including a 2°C Climate Scenario, that provide a reasonable diversity of potential future climate states
- translated such physical scenarios into socioeconomic models with transition pathways for various economic activities.
- 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.
