Climate scenario analysis: It is scientifically undeniable that climate change is happening, and some countries and regions are already experiencing the impact, as in sudden temperature changes and other natural disasters.
To better prepare for climate change and its risks on financial health, some financial institutions and companies in Europe, Australia, Canada, and the United States are starting to deploy possible scenarios to give alternative assumptions across industries, including technology.
Risk management network KPMG, headquartered in the Netherlands, introduced its scenario analysis tool through a brochure in 2023, dubbed as “Climate IQ” scenario analysis tool.
According to the network, Climate IQ is a modelling system that generates “modular, end-to-end” climate scenarios. It covers more than 65 different sectors from 141 countries.
The tool can go through an array of narratives within scenarios of multiple layers and can shape various results based on the needs of different audiences, such as financial agencies.
International organisations like the World Business Council also have their tools to assess the risks of climate change on finance. “Energy Climate Scenario Catalogue version 2.0” is its latest tool released in March 2023.
As the title implies, it works like a catalogue of published scenarios, where users can browse through variables across “investment, demand, and emissions.” The model also offers separate tabs for explorations of scenarios, variables, and filters.
Private company Climate Scale seems to provide models for both top-down and bottom-up, encompassing individual and private client bases.
Climate Scale also offers online tools for their clients to navigate up to 20 metrics of climate change-related data, including “temperature, water, wind, oceans, and soil”.
One of their services is a live map of the expected impacts of a climate change variable, allowing people to experience scenarios in a more visual way like with colour-blocked regions.
Climate scenario analysis is still in its infant stage, with organisations practising pilot programmes. United Nations Environment Programme Finance Initiative recommends organisations use scenario models that reflect time horizons, impacts, variables, granularity, validation, and understanding of predicted scenarios.
For effective preparations for upcoming, perhaps imminent, climate challenges, it seems clear that more governments and companies may utilise the assistance of big data and artificial intelligence-backed technologies.
