Improving Scenario Analysis Doesn’t Mean Forcing Global Consistency When Risks Remain Diverse

Scenario analysis is complex and cannot use a shared set of inputs and scenarios for every use. Instead of seeing that as a weakness that undermines comparability, this should be seen as an important part of the process of becoming better prepared to deal with uncertainty as physical impacts and impacts of the climate transition become more visible.

Regulators and standard setters have made increasing use of scenario analysis as part of stress testing and climate disclosureScenario analysis for climate-related financial risks remains a new area, with considerable uncertainty driven by the complex interaction between economic and environmental systemsHaving a diverse range of scenarios tried by different institutions for different purposes with different input...