Financial institutions strive for economic stability but climate-related risks could have large impacts that may result in high costs. Therefore, science-based information is critical for sound decision-making; mutual learning between climate scenario modelers and central bankers is more important than ever before.
The IIASA ECE Program have been involved in a series of activities to help global finance go green. IIASA presently hosts the Network for Greening the Financial System (NGFS) Scenario Explorer and data base for many users around the world. The NGFS is a group of 65 central banks and supervisors and 12 observers committed to sharing best practices, contributing to the development of climate– and environment–related risk management in the financial sector and mobilizing mainstream finance to support the transition toward a sustainable economy.The transition scenarios explore future changes to the energy system and the global economy if climate targets are met or not, and whether the transition to a low-carbon future happens in an orderly or disorderly fashion.
Further to this, IIASA's ECE Program has played a key role in its involvement with the UN Environment Finance Initiative and particularly on their Task Force on climate-related Financial Disclosures (TCFD) framework methodology that brought together various functions from within the banks including credit risk, stress testing, sustainability and business development with leading scientists, and risk and investment management experts.
NGFS Scenario Explorer
The NGFS Scenario Explorer is a web-based user interface for transition scenario results selected for the NGFS. This provides intuitive visualizations & display of timeseries data and download of the data in multiple formats. This Scenario Explorer hosts the NGFS scenarios, which were produced by NGFS Workstream 2 in partnership with an academic consortium from the Potsdam Institute for Climate Impact Research (PIK), International Institute for Applied Systems Analysis (IIASA), University of Maryland (UMD), Climate Analytics (CA) and Eidgenössische Technische Hochschule Zürich (ETH).
This work was made possible by grants from Bloomberg Philanthropies and ClimateWorks Foundation.
The UN Environment Finance Initiative is a global partnership between the United Nations Environment Programme and the financial sector. Over 200 institutions, including banks, insurers, and investors work with UNEP to bring about systemic change in finance to support a sustainable world. IIASA contributed to the UNEP FI's Task force on climate-related Financial Disclosures (TCFD) framework methodology that helps banks apply state-of-the-art global climate change scenarios that are available to evaluate the risks and opportunities that the low-carbon economic transition may present to their lending portfolio.
NGFS Climate Scenarios for central banks and supervisors
To improve climate related risk management in the financial sector and facilitate a smooth transition toward a sustainable economy, IIASA researchers joined forces with other scientists and a network of over 60 central banks and financial market supervisors to publish an updated set of scenarios. They show early greenhouse gas emissions reductions can minimize both physical and financial risk - in contrast, delayed action or no action would drive up costs.