Climate change scenarios and stress testing

Evaluate climate change risks and opportunities

Regulators, investors, and banks around the world are accelerating their efforts to evaluate and strengthen the resilience of financial systems to climate change and related policy actions. Banks and their supervisors are exploring physical and transition risks under various climate stress test or exploratory scenario exercises and investors are keen to quantify the impact on their portfolios and position themselves to capture opportunities under different climate change scenarios.

We support institutions’ stress testing and strategic decision making with a set of climate change scenarios. These scenarios describe how different sets of stakeholders will shape policies and actions as we move towards a future with lower greenhouse gas (GHG) emissions.

Understand the economic factors of climate change risks A methodology for better decisions in the age of energy transition

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Regulatory climate stress scenario expansion

Our economist and modeling teams support financial institutions who are undertaking regulatory climate stress test or scenario analyses with modeling support and long-term projections of industry and country specific economic and financial variables. We construct and expand scenarios which are consistent with the assumptions provided by regulators such as the commonly referred scenarios from the Network of Central Banks and Supervisors Network for Greening the Financial System (NGFS).

Our economist and modeling teams leverage award-winning integrated models to offer geographical, industry level and macro-financial variable expansion services for regulatory climate stress test or exploratory exercises.

Economic & climate risk interactions

Numerous touch points between physical and transition risk factors and economic/financial performance

Proprietary climate scenarios

To assist institutions with managing risks effectively and identifying opportunities, we also prepare plausible and integrated climate scenarios with a 30-year horizon including two net zero greenhouse (GHG) emissions cases:

Inflections scenario, our base case, includes pivotal shifts in social, policy, and market forces that drive fundamental change in energy markets.

Discord scenario imagines a dysfunctional world in which the political turmoil of 2020 returns after a short rebound, hampering economic growth and creating investment uncertainty and inertia. Some trends toward decarbonization continue, but many fade away.

Green rules scenario outlines a super-charged reaction following the pandemic and climate-related disasters where populations demand strong government action and cooperation to provide security around health and physical environment. The Green Rules scenario has two further modes that assume achieving net zero emissions by 2050 and work backwards from there:

Accelerated Carbon Capture and Sequestration (ACCS) includes widespread use of CCS to offset emissions from energy and hard-to-abate industrial sectors.
Multitech Mitigation (MTM) includes only a small amount of CCS, and instead relies on diversification of energy supply and extensive electrification of all sectors and economies based on renewable capacity.

Custom scenarios based on specific narratives around energy transition and climate change.

What’s available through our climate scenario services

Carefully crafted narratives, including comparative tables and charts.
Inputs into scenario design and narratives from our country and sector experts across industries such as energy and automotive.
Simulations that consider the dynamics of the energy transition and fuel substitution possibilities.
Unique set of assumptions for each scenario, which include economic factors, geopolitical environment, and focus to reduce carbon emissions to net zero through policies and carbon pricing, and consumer behavior, among others.
Data sets and detailed assessments of the scenario implications on financial markets, asset prices, and funding requirements at a country by country as well as regional and global levels.
Scenario solution files for clients who have access to our economic models.
Transparent model development and validation documentation.
Customer support and direct access to the practitioners who construct and model the scenarios.

Economics & Country Risk Podcasts

PODCAST Sep 26, 2024 29:57

Previewing the 2024 Inland Distribution Conference

PODCAST Sep 19, 2024 24:24

The Decisive | Ep. 14 - India's Demographic Dividend

PODCAST Sep 14, 2024 20:38

The Decisive | Ep. 15 - PMI in Focus: Trade trends and political uncertainty

PODCAST Sep 07, 2024 37:55

The Decisive | Ep. 13 - How US Monetary Policy Works

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Research & Analysis

Blog Nov 19, 2024

Global economic outlook: November 2024

Blog Nov 13, 2024

US presidential election impact: Region by region

Blog Oct 15, 2024

Global economic outlook: October 2024

Blog Sep 20, 2024

Global economic outlook: September 2024

Experts

Jonathan Ablett

Jonathan leads the S&P Global Market Intelligence team in charge of scenario design and new macroeconomic and sectoral economic models. As part of this work, he helps develop customized macroeconomic scenarios for due diligence, regulatory stress tests, impact analysis, and strategic planning purposes. He leads the team that implements these scenarios, operates the proprietary macroeconomic model, and designs new models for additional client purposes.Prior to joining S&P Global (now part of S&P Global), Jonathan was an Expert at the McKinsey Global Institute, the think tank of McKinsey and Company, where he specialized in applied economic and strategic analysis for both private and public sector clients. Prior to joining McKinsey, he worked at the Massachusetts House Ways & Means Committee developing budget and policy recommendations and the World Bank.Jonathan holds an M.A. in Economics from McGill University and an M.B.A. from Babson College.

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David Iaia

David oversees the state, metro, and county forecasts covering more than 300 metropolitan areas and 3,100 counties. He manages staffing and has an active role in development and enhancement of the group's data methodology. Additionally, he is the primary analyst for Virginia, Maryland, the District of Columbia, and Connecticut. He has done consulting work on the cost of doing business in states and for the U.S. Conference of Mayors on the importance of metro areas in the national economy. Prior to joining the company in 1998, David was a graduate student in economics at Brown University, completing all the requirements but the dissertation.He also holds a Bachelor of Arts in Economics from Amherst College.

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Michael Konidaris

Michael leads the product development for the CECL implementation by financial institutions. His responsibilities include the construction of cross-asset class econometric models, the development of forecasts for Libor, Swap and Corporate Bond rates, and the construction of simulations of global economic scenarios to evaluate the P&L of clients' portfolios.Michael joined S&P Global through the 2017 acquisition of Macroeconomic Advisers. He has worked as an economic consultant on the forecasting team at Roubini Global Economics and as a research intern at The Midway Group, a hedge fund specializing in the US residential mortgage market. He completed his military service as a sailor at the Hellenic Navy and co-founded and served at the board of directors of AUEB's Investment and Finance Club, the first ever finance club in a Greek University. Michael holds a Bachelor of Science degree in accounting and finance from Athens University of Economics and Business (AUEB), Greece, and a Master of Arts degree in economics from New York University (NYU), US.

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Climate change scenarios and stress testing

Evaluate climate change risks and opportunities

Regulatory climate stress scenario expansion

Economic & climate risk interactions

Proprietary climate scenarios

What’s available through our climate scenario services

Experts

Jonathan Ablett

David Iaia

Michael Konidaris