Economic Scenarios for Climate Risk

Climate change will affect economies through physical risks such as rising sea levels, and transition risks such as higher energy costs and changes in energy consumption. As the threats from climate change mount, businesses are focusing on quantifying what these physical and transition risks mean for them.

Offering

Using the Moody’s Analytics Global Macroeconomic Model, we have produced climate risk scenarios that enable organizations to analyze business impacts and stress their portfolios for the risks posed by climate change. Covering more than 18,000 macroeconomic variables, this expansive scope of climate-related macroeconomic data allows for selection from an extensive array of climate scenarios to accurately quantify both physical and transition risks associated with climate change. 

Our offerings include:

• Climate scenarios based on the guidance of the Network for Greening the Financial System (NGFS)
• Regulatory climate scenarios, including the Bank of England, European Central Bank, and selected climate scenarios issued by other country regulators

Broad coverage and detailed insight to the economic impacts of climate risk not matched by other sources.

• Full variable coverage for our complete set of economic and financial forecast series.
• Available for more than 70 countries, and all U.S. states and metro areas.
• Quantifies climate threats posed by transition risk, chronic physical risk, and acute physical risks including new estimates capturing tropical cyclones, wildfires, floods, heatwaves and drought.
• High-frequency quarterly forecasts with a horizon to 2100 for national-level climate scenarios and 30-year horizon for U.S. regional climate scenarios.
• Fully transparent equations and documented model methodology.
• Bi-annual updates incorporating topical events such as COVID and geopolitical conflicts virtually in real time.
• Reliable forecasts with high levels of quality control by 30+ economists that conduct quality oversight on all our climate forecasts.
• Additional climate-specific macroeconomic data for 20+ countries.
• Flexible delivery options, including API.
• Customizable scenario paths using our Scenario Studio platform.

A Flexible and Transparent Solution

• Transparent and fully validated model and equations
• Multiple delivery options, including API
• Direct access to country economists
• Exceptional customer support
• Customizable scenario paths using our Scenario Studio platform 

Methodology

Moody’s Analytics starts with the NGFS parameters for top-line variables, then expands the scenarios to extrapolate additional variables using our Global Macroeconomic Model. A key to incorporating climate risk into traditional macroeconomic variables is including the trajectory for carbon prices. Carbon prices flow through the model through price channels, raising inflation rates and factoring into central banks’ reaction functions. As governments increasingly adopt carbon tax policies to limit the amount of carbon dioxide in the atmosphere, some industries are affected more adversely than others. These industrial transition risks are reflected in the forecasts produced by the Global Macroeconomic Model. Learn More.