Developed in-house in exclusive partnership with Cambridge Econometrics, our suite of deterministic climate scenarios are utilized in combination with our stochastic economic scenarios to assess and quantify the potential financial and economic implications arising from climate change-related physical and transition risks.
Click on each climate scenario to learn more
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Net-Zero
In Ortec Finance’s ‘Net-Zero’ climate scenario, global CO2 emissions reach net-zero by 2050, and global average temperatures stabilize at 1.5°C above pre-industrial levels by 2100. A highly ambitious set of policies aimed at reducing emissions are introduced. These policies include global carbon pricing and energy taxation, a phase-out of coal and fossil fuel technologies, energy efficiency regulations, and subsidies for renewable energy, electric vehicles, afforestation and reforestation.
New power generation technologies, including hydrogen and carbon capture and storage (CCS) are assumed to be viable and there is significant adoption of afforestation and reforestation activities to offset hard-to-abate emissions.
The world experiences comparably low impacts from extreme weather events and gradual warming as the world adapts to the effects of climate change.
The financial market implications arising from transition and physical risks are not materially disruptive.
This scenario explores the risks and opportunities of an optimistic, ambitious but orderly transition to net-zero by 2050.
Net-Zero Financial Crisis
In Ortec Finance’s ‘Net-Zero Financial Crisis’ climate scenario, global CO2 emissions reach net-zero by 2050, and global average temperatures stabilize at 1.5°C above pre-industrial levels by 2100. A highly ambitious set of policies aimed at reducing emissions are introduced. These policies include global carbon pricing and energy taxation, a phase-out of coal and fossil fuel technologies, energy efficiency regulations, and subsidies for renewable energy, electric vehicles, afforestation and reforestation.
New power generation technologies, including hydrogen and carbon capture and storage (CCS) are assumed to be viable and there is significant adoption of afforestation and reforestation activities to offset hard-to-abate emissions.
The world experiences comparably low impacts from extreme weather events and gradual warming as the world adapts to the effects of climate change.
There are disruptive effects in financial markets as climate risks are abruptly priced-in in 2025, triggered by the submission of new Nationally Determined Contributions (NDCs), leading to a confidence shock to the financial system that year. In 2025, investors who committed to net-zero targets by 2050 evaluate their decarbonization trajectory which results in the need for sudden portfolio adjustments. Divestments from assets related to carbon-intensive economic activities (‘stranded assets’) causes an abrupt revaluation and subsequent knock-on financial effects.
This scenario explores a disorderly and financially disruptive transition.
An additional stress version of this scenario explores the impact of a more severe sentiment shock triggered by the over-reaction from financial markets in response to a low-carbon policy acceleration.
Delayed Net-Zero
In Ortec Finance’s ‘Delayed Net-Zero’ climate scenario, a highly ambitious set of policies aimed at reducing emissions are introduced. These include global carbon pricing and energy taxation, a phase-out of coal and fossil fuel technologies, energy efficiency regulations, and subsidies for renewable energy and electric vehicles . These policies are not implemented on the scale that is required to reach net-zero emissions by 2050. This scenario results in emissions trending towards net-zero after 2050 and global average temperatures stabilizing at 2°C above pre-industrial levels by 2100.
This scenario reflects rapid power generation technology developments, with considerable progress in the development of carbon capture and storage (CCS) technologies.
The world is faced with moderate impacts from extreme weather events and temperature change. Financial market disruption arising from transition risks occur during the late 2020s.
This scenario explores increased policy action and technological developments, that drive a transition which reduces severe physical risk impacts.
Limited Action
In Ortec Finance’s ‘Limited Action’ climate scenario, global average temperatures are 1.8°C warmer than pre-industrial levels by 2050 and 2.6°C warmer by 2100. Policymakers take moderate steps to address climate change but commitments and Nationally Determined Contributions (NDCs) made under the Paris Agreement are not fully met and adjusted for credibility. Only existing carbon markets continue, including the EU Emissions Trading System (ETS), with an assumed moderate increase in the carbon price. Regulation and taxation of fossil fuel-based technologies is limited.
There is progressive adoption of low-carbon technologies, such as electric vehicles, driven by factors including cost reduction and efficiency improvements.
This scenario reflects high risks from extreme weather events and high temperatures. These risks have material financial market implications in the 2020s and 2030s, due to lower expected performance.
This scenario explores a limited transition, with high exposure to physical risk.
High Warming
In Ortec Finance’s ‘High Warming’ climate scenario, the global average temperature is around 2°C warmer than pre-industrial levels by 2050 and 3.7°C warmer by 2100. No new low-carbon policies are enacted and some existing ones are scaled back. Multiple climate tipping points are reached and many countries suffer from extreme drought and water shortages.
The higher average temperatures affect human health and damage crop yields, driving a reduction in labor and agricultural productivity. In addition, infrastructure damage from extreme weather events leads to direct losses and indirect effects to the economy via supply chain disruption.
The triggering of multiple climate tipping points drives an exponential increase in extreme weather events. The lost productivity and extreme weather events have large financial market implications in the 2020s and 2030s, due to lower expected performance.
This scenario explores the risks of a failed transition leading to very severe physical risks.
An additional stress version of this scenario explores a system collapse with extreme heat stress and climate tipping points driving a worst-case outcome, with complete collapse of the economy and society by 2100.
Learn more about our Climate Scenario Analysis Solution - ClimateMAPS