Changing course: A comprehensive investor guide to scenario-based methods for climate risk assessment, in response to the TCFD

This report details the results of the UN Environment Programme Finance Initiative (UNEP FI) Investor Pilot on TCFD Adoption, a collaborative effort to explore, enhance and apply a methodology for assessing the impact of physical and transition risks and opportunities on the portfolios of institutional investors. The Investor Pilot Group comprises 20 institutional investors from across the globe.

This report presents the methodology enhanced and used by the Investor Pilot Group in collaboration with the data analytics firm Carbon Delta. Outputs and evaluations of this methodology are intended as a first step towards understanding the potential for incorporating the TCFD recommendations on scenario-based risk assessment in investors’ financial disclosure. In addition, and in order to highlight the range of methodologies currently available to conduct these types of assessments, the report offers a ‘landscape review’ of other providers’ methodologies for climate-related scenario analysis. 

The ultimate objective of the Investor Pilot including this report is two-fold: i) boost investor savviness and ii) support industry-wide harmonisation. The intention of the UNEP FI Investor Pilot is both to comprehensively guide individual investors on how to design and structure the application or use of scenario-analysis within their own institutions as well as to provide a basis from which the investment community can seek to achieve harmonisation and standardisation of investor disclosures so that over time these become comparable. In fulfillment of these goals, the report compares climate values at risk across 1.5°C, 2°C and 3°C worlds, and also provides case studies for operationalising the methodology presented.