Ch07. Climate Models and Scenario Analysis

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Questions and Answers

What is the purpose of examining emissions trajectories in transition risk assessment?

  • To assess the impact of climate change on supply chains
  • To determine the cost of stranded assets
  • To align facilities, strategies, and portfolios with global climate goals (correct)
  • To estimate temperature rise and precipitation

What is a limitation of using emissions trajectories in physical risk analysis?

  • They do not account for the lag in the global climate system (correct)
  • They are not relevant for assessing weather extremes
  • They are only useful for financial institutions
  • They are not useful for estimating temperature rise

What is a common parameter that must be decided on when conducting climate scenario analysis?

  • The scope of the analysis (correct)
  • The macroeconomic variables used
  • The type of climate risk being analyzed
  • The level of temperature rise

What is an example of a quantitative output from climate scenario analysis?

<p>A revenue forecast (A)</p> Signup and view all the answers

What is a factor that can influence the scope of climate scenario analysis?

<p>The availability of data on supply chains (D)</p> Signup and view all the answers

What is an example of a built-in parameter or assumption in climate scenario analysis?

<p>The GDP growth rate (D)</p> Signup and view all the answers

What is the primary purpose of using global reference scenarios in transition risk analysis?

<p>To create sector-specific scenarios for emissions trajectories (B)</p> Signup and view all the answers

Why are global scenarios less important for physical risk planning?

<p>Because the significant physical differences between emissions scenarios only manifest after 2050 (C)</p> Signup and view all the answers

What is the purpose of representative concentration pathways (RCPs) and shared socioeconomic pathways (SSPs)?

<p>To broaden the use of scenario-based modeling beyond scientific use cases (C)</p> Signup and view all the answers

What is the main benefit of using scenario planning for corporate contingency planning?

<p>To integrate climate risk into investment and strategic decisions (D)</p> Signup and view all the answers

What is the primary audience for global-level scenarios and scenario-based modeling?

<p>Corporations and financial institutions (B)</p> Signup and view all the answers

What is the timeframe for when physical differences between emissions scenarios start to manifest?

<p>After 2050 (C)</p> Signup and view all the answers

What is the primary difference between the old RCPs and the new SSPs in terms of their start years?

<p>The old RCPs started in 2007, while the new SSPs started in 2014 (B)</p> Signup and view all the answers

What is the primary purpose of the 2°C-compliant SSP1-RCP2.6 scenarios?

<p>To reflect higher emissions in the 2007-2014 period (C)</p> Signup and view all the answers

What is the name of the scenario that combines climate and social targets and limits warming to 2°C in line with Paris targets?

<p>Sustainable Development Scenario (C)</p> Signup and view all the answers

Which organization has modeled net-zero emissions by 2050 scenarios?

<p>IEA (B)</p> Signup and view all the answers

What is the main difference between the SSP scenarios and the RCP scenarios in terms of their emissions trajectories?

<p>The SSP scenarios have different emissions trajectories, while the RCP scenarios have identical emissions trajectories (B)</p> Signup and view all the answers

What is the name of the scenario that reflects existing policy frameworks and announced policy intentions?

<p>Stated Policies Scenario (B)</p> Signup and view all the answers

What is the primary objective of integrating climate scenario analysis into asset management, as demonstrated by Abrdn and LGIM?

<p>To develop a climate-resilient investment portfolio (B)</p> Signup and view all the answers

What is the purpose of Destination@Risk, the bespoke climate risk framework developed by LGIM and Baringa Partners?

<p>To integrate climate scenario analysis into asset management (C)</p> Signup and view all the answers

What is the primary benefit of using climate scenario analysis in transition risk assessment, as demonstrated by the consolidated transition risk heat map?

<p>To identify high-transition risk sectors (D)</p> Signup and view all the answers

What is the primary goal of Abrdn's climate scenario framework integration into its investment activities?

<p>To integrate climate scenario analysis into business strategy (D)</p> Signup and view all the answers

What is the primary benefit of using scenario planning for corporate contingency planning in the context of climate change?

<p>To enable climate-resilient business strategy (B)</p> Signup and view all the answers

What is the primary focus of the consolidated transition risk heat map across six high-transition risk sectors?

<p>To identify high-transition risk sectors and their potential financial impacts (B)</p> Signup and view all the answers

Which entity provides detailed data on different asset classes by scenario and time horizon for firms to conduct in-house analysis?

<p>Oliver Wyman, Ortec Finance, and NGOs (A)</p> Signup and view all the answers

What is the primary use of the PACTA methodology in climate scenario analysis?

<p>To assess the alignment of investment portfolios with climate goals (C)</p> Signup and view all the answers

What is the main benefit of using scenario planning in climate risk management?

<p>It provides a framework for identifying and mitigating climate-related risks (D)</p> Signup and view all the answers

Which of the following is a key characteristic of the 'Sky 1.5' scenario developed by Shell?

<p>It is a 2°C-compatible scenario (D)</p> Signup and view all the answers

What is the primary purpose of the PACTA for Banks methodology?

<p>To assess the alignment of corporate loans with climate goals (D)</p> Signup and view all the answers

Which entity has developed a methodology for assessing the alignment of investment portfolios with climate goals?

<p>2 Degrees Investing Initiative (C)</p> Signup and view all the answers

What is the primary function of Integrated Assessment Models (IAMs)?

<p>To allow analysis of how societal and economic choices affect each other and the natural world (A)</p> Signup and view all the answers

What is a key consideration in climate scenario analysis related to the time scale of the analysis?

<p>The relevance of long-term infrastructure planning (D)</p> Signup and view all the answers

What is a key challenge in integrating climate scenario analysis into sustainable investment strategies?

<p>The difficulty of incorporating qualitative analysis into investment decisions (A)</p> Signup and view all the answers

What is a key output of climate scenario analysis in the context of climate risk management?

<p>Asset valuations reflecting the impact of climate change (D)</p> Signup and view all the answers

What is a key parameter that must be decided on when conducting climate scenario analysis for a company?

<p>The timeframe for the analysis (e.g., 2030, 2050, 2100) (C)</p> Signup and view all the answers

What is a key benefit of using Integrated Assessment Models (IAMs) in climate scenario analysis?

<p>The ability to integrate societal and economic choices with natural systems (C)</p> Signup and view all the answers

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