Best Practices: Climate Scenarios For Risk Management

Published 22 November 2024 by Emma Cutler & Katelyn Johnson &

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Executive Summary

Climate scenarios help firms assess risk and improve resilience to climate change. They are particularly valuable for managing the uncertainty surrounding the specifics of future climate change and its impacts. However, the scenarios that firms most commonly use are not perfect. To better support business needs, organizations should consider a variety of models and data sources. Scenarios should incorporate multiple sources of uncertainty – such as emissions pathways, socioeconomic conditions, climate system response, feedbacks and tipping points, and interannual variability – at local and global scales over the short, medium and long term. 

Table of contents

Summary for decision-makers
Climate scenarios are a key piece of risk management
Use and misuse of climate scenarios for risk management

Scientific perspective: the good, the bad and the ugly of current approaches
Business perspective: available climate scenarios do not address all needs
Alternative approaches to climate scenarios add value
Scenarios should support business needs
Five recommendations for using climate scenarios in risk management

Table of figures

Figure 1. Strengths and weaknesses of stochastic and deterministic models
Figure 2. Examples of alternative climate scenarios
Figure 3. Questions to consider when evaluating and selecting climate scenarios

About the authors

Emma Cutler

Senior Analyst
Emma is a Senior Analyst in the Verdantix Net Zero & Climate Risk practice. Her current research agenda focuses on physical and transition climate risk, climate resilience and adaptation. She has a background in simulation and statistical modelling applied to climate adaptation, coastal management and international development. She holds a PhD in Systems Engineering from Dartmouth College and a BA in Mathematics and Environmental Studies from Bowdoin College.

Katelyn Johnson

Senior Manager, Risk Management
Katelyn is the Senior Manager in the Verdantix Risk Management practice. Her current research agenda focuses on climate risk and its integration into risk management frameworks. Prior to joining Verdantix, Katelyn was a climate scientist at GNS Science in New Zealand. She has previously held roles in the energy industry, where she helped projects manage risk due to weather and ocean phenomena. Katelyn holds a PhD in Geology from Victoria University of Wellington and an MS in Earth Sciences from Ohio State University – both focusing on climate science – as well as a BS in Meteorology from Texas A&M University.

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