• NGFS scenarios include projections of potential losses from extreme weather events
• NGFS scenarios are also consistent with the scenarios evaluated in the Intergovernmental Panel on Climate Change’s Sixth Assessment Report (IPCC)
• The NGFS scenarios provide a framework for assessing and managing climate-related risks by investigating the transition and physical effects of climate change over a long time horizon and under different assumptions

The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) has released a report on climate scenarios to help central banks and supervisors integrate climate-related risks into their work and beyond.

For the first time, the NGFS scenarios include projections of potential losses from extreme weather events (floods and tropical cyclones), in addition to the specific macroeconomic effects of chronic climate change.

The NGFS scenarios are also consistent with the scenarios evaluated in the Intergovernmental Panel on Climate Change’s Sixth Assessment Report (IPCC). Due to the length of time required for completion, the NGFS scenarios were unable to account for the consequences of the Ukraine conflict and the current energy crisis. Nonetheless, they remain informative about the current situation, demonstrating both the challenges and the feasibility and benefits of continuing with the net zero transition.

The NGFS scenarios provide a framework for assessing and managing climate-related risks by investigating the transition and physical effects of climate change over a long time horizon and under different assumptions. They demonstrate that achieving net zero CO2 emissions on a global scale by 2050 (a necessary condition for limiting global warming to 1.5°C above pre-industrial levels) will necessitate a bold transition across all sectors of the economy.

Significant investment would need to be directed toward clean energy in order for renewables and biomass to meet 70% of global primary energy needs by 2050. Simultaneously, the NGFS scenarios show that the macroeconomic impact of no policy action to mitigate climate change would be extremely harmful, particularly in the medium-to-long run: at the global level, this could result in a 20% decrease in GDP in 2100. Due to the limited hazards and transmission channels considered when assessing the impact of physical risk, this figure most likely represents the lower bound of possible GDP decline.

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