This report by MSCI Institute explains how investors can use climate scenario analysis to help assess the potential impacts of climate change and climate transitions on their investments. This makes it easier to assess potential risks and opportunities, but implementing this analysis can be difficult.
This report offers help in three ways:
1) Climate scenarios are classified based on complexity, separated into four types. Each one is examined for strengths and weaknesses, and the report explains how they can each help with analyses.
2) Suggestions are offered to guide the use of climate scenario analysis. There are four levels based on scope, risk quantification, and integration into decision making.
3) The use of climate scenarios is explained in specific cases. This can include stress testing for supervision and regulation, analysis for disclosure obligations, as well as stress testing for investment activities.
Different practitioners have different levels of experience, which means they might use climate scenarios differently. The report helps guide practitioners of all levels to use climate scenarios more deeply and with greater complexity. It offers a holistic approach that is designed to improve decision making and make it more resilient. By using climate scenario analysis, investors can better manage climate risks and better capitalize on opportunities.
