Financial institutions’ investment and lending portfolios could be affected by both physical climate risks stemming from impacts related to increasing temperatures, and from transition climate risks stemming from the economic consequences of the shift to a low-carbon economy. Here we present a consistent framework to explore near term (to 2030) transition risks and longer term (to 2050) physical risks, globally and in specific regions, for a range of plausible greenhouse gas emissions and associated temperature pathways, spanning 1.5-4oC levels of long-term warming. By 2050, physical risks deriving from major heatwaves, agricultural drought, heat stress and crop duration reductions depend greatly on the temperature pathway. By 2030, transition risks most sensitive to temperature pathways stem from economy-wide mitigation costs, carbon price increases, fossil fuel demand reductions and coal plant capacity reductions. Considering several pathways with a 2oC target demonstrates that transition risks also depend on technological, policy and socio-economic factors.
Published: August 24, 2023
Gambhir A., M.A. Vallimyalil, H.C. McJeon, N. Arnell, D. Bernie, S. Mittal, and A. Koberle, et al. 2022.Near-term transition and longer-term physical climate risks of greenhouse gas emissions pathways.Nature Climate Change 12, no. 1:88-96.PNNL-ACT-SA-10562.doi:10.1038/s41558-021-01236-x