Climate scenario analysis of portfolios
NGFS pathways are translated into sector and company shocks to earnings, asset values and credit spreads, then applied to holdings, with each translation step and its assumptions recorded.
GRA · Asset Management Nexus
Spatial financeWhere capital meets hazard, exposure and transition
Scenario analysis for portfolios
Scenario design and stress testing explore how portfolios and funds would fare under severe but plausible conditions: disorderly transitions, physical climate shocks, market-wide redemptions or sudden rate rises. They complement statistical risk measures where history offers little guide, and their value lies in transparent assumptions rather than in any single result.
01Qeyd
Scenario analysis for portfolios on the record.
Method recordSTEM method
- RêbazSêwirandina senaryoyan û ceribandina bin zextê
- ParêzvanRêveberiya xetera pergalî
- Applied inAsset Management Nexus
- Dane4 inputs
- Checks3 validation steps
- Canonical pageSTEM Commons
02Serlêdan
What scenario design and stress testing does here.
Scenario design and stress testing construct plausible, severe future conditions to examine how pergalan and institutions would perform. They complement probabilistic analysis where data are scarce or futures are deeply uncertain. In capital markets and investment, climate and hazards and biodiversity and nature, stress tests reveal vulnerabilities that arise when several risks materialise together. They inform capital, contingency and coordination plans across sectors. The canonical description is on the STEM Commons.
System-wide redemption and margin scenarios
Fund outflows, collateral calls and dealer capacity are combined in one scenario so that second-round sales across funds with common holdings can be traced.
Reverse stress testing
The analysis starts from an outcome a board cannot accept, such as suspended dealing or a funding shortfall, and works back to the combinations of conditions that would cause it.
03Çavdêrî bike
Scenario stress.
The screen a team would use to follow this method: its measures, states and decisions. Names are examples and values are illustrative.
Scenario stress
Asset management · Scenario analysis for portfolios · Run R-5442
Severe case breaches limitGRA · Asset Management Nexus
Scenario set
| Xeta bingehîn | Central | 26 | Di nav de |
| Adverse | 1-in-25 | 60 | Girtin |
| Tund | 1-in-100 | 87 | Breach |
| Reverse stress | Find the break | 100 | Defines edge |
Method card
- Rêbaz
- Sêwirandina senaryoyan û ceribandina bin zextê
- Vegotin
- compound shock
- Horizon
- 2 years
- Nîşan
- MODELKIRÎ
Impact build-up, severe case
04Dane
What the method consumes.
Datasets and records used by scenario design and stress testing on this platform, with the role each plays and the label its values carry. Sources are listed in the source register.
| Dane | Rol | Nîşan |
|---|---|---|
| NGFS climate scenarios | Macro and sector pathways | MODELKIRÎ |
| Supervisory stress scenario frameworks | Severity and design reference | Statîstîkên weşandî |
| Historical stress episodes | Analogues and calibration | ÇAVDÊRÎKIRÎ |
| Portfolio and liability data | Exposure to the shocks | REPORTED |
05Scenario model
Transition and physical risk on a portfolio.
Three scenario families after the NGFS framework move a sector portfolio through carbon costs and warming damages; the transmission view follows the losses to lenders, investors, public finances and households. Scenario: named assumptions about the future, not a forecast.
Kontrol
- Carbon price at the horizon, orderly path
- 200 per tCO2
- Delay before a disorderly transition
- 50% of horizon
- Cost passed to customers
- 50%
- Warming today above pre-industrial
- 1.30°C
- Warming per decade, current policies
- 0.25°C
- Damage coefficient
- 0.24% per °C²
- Salên pêş
- 25 years
Xwendin
- Worst scenario at the horizon
- −33.6% of value
Jimar, rêbaz û çavkanî
| Sal | Orderly transition (% value) | Delayed, disorderly transition (% value) | Current policies (% value) |
|---|---|---|---|
| 0 | −0.38 | −0.38 | −0.38 |
| 3 | −2.87 | −0.53 | −0.67 |
| 6 | −5.36 | −0.68 | −0.97 |
| 9 | −7.84 | −0.84 | −1.27 |
| 12 | −10.33 | −0.99 | −1.57 |
| 15 | −12.82 | −7.12 | −1.87 |
| 18 | −15.31 | −15.05 | −2.17 |
| 21 | −17.80 | −23.00 | −2.48 |
| 24 | −20.29 | −30.94 | −2.79 |
Rêbaz
- Climate scenario families NGFS (2023), Climate Scenarios for central banks and supervisors, Phase IV
- Climate stress test of the financial system Battiston and others (2017), Nature Climate Change 7
- Damage function Nordhaus (2017), Revisiting the social cost of carbon, PNAS 114
- Transmission channels BCBS (2021), Climate-related risk drivers and their transmission channels
- Pankeya nediyarîyê (Monte Carlo ya parametreyan) Spiegelhalter, Pearson and Short (2011), Visualising uncertainty about the future, Science 333
- Hesasiyeta yek-yek (tornado) Saltelli and others (2008), Global Sensitivity Analysis: The Primer, Wiley
Dane
The model runs on the teaching values set by the controls. To calibrate it for a place, read it against these admitted layers and series, which this page’s map can draw:
- Dirêjahiyên bajarî Natural Earth
- Benderên behrê Natural Earth
- Past year, daily temperature (ERA5 via Open-Meteo) Open-Meteo.com (CC BY 4.0), Copernicus ERA5 (C3S/ECMWF) · register open-meteo.public-pages
- Surface air temperature, daytime (AIRS) NASA AIRS · register nasa.gibs.context-live-layers
Li seranserê şeş stûnan, bi pêşengiya Nexus Consortium
- Ceribandin Labs
- Hatiye avakirin di Asset Management Nexus in Foundry
- Tê ceribandin li Asset Management Nexus in Universe
- Hatiye kodkirin di Darayî, sîgorta û aborî di Standards de
- Hatiye weşandin di Asset Management Nexus in Reports
- Tê de tê dayîn Fakulteya Darayî û Aborî di Academy de
06Erêkirin
How results are checked.
Scenarios are reviewed for plausibility, internal consistency and severity relative to history. Exercise outcomes are compared with actual events when they occur.
| Kontrol bikin | How it is done |
|---|---|
| Plausibility and severity review | Scenarios are compared with historical episodes and with supervisory severity levels |
| Internal consistency | Shocked variables are checked against each other so no scenario combines incompatible paths |
| Assumption register | Every behavioural and pricing assumption is listed with its source and the sensitivity of the result to it |
Scenario choice can reflect prevailing assumptions and miss novel combinations. Results depend on how participants and models represent responses.
07Exposure, loss and capital
What scenario analysis for portfolios means for exposure, loss and capital.
The exposure, loss, scenario and capital views a risk officer, supervisor or ministry of finance would ask for, with the frameworks they report against. Structures follow supervisory and actuarial practice. Values are illustrative: never prices, ratings or advice.
Scenario pathways
How scenario analysis for portfolios could be stressed under the scenario families central banks and supervisors use.
| Scenario family | Transition risk | Physical risk | What a stress test asks |
|---|---|---|---|
| Orderly | Early, gradual policy | Kêmtir | Can the book absorb a steady repricing? |
| Disorderly | Late, abrupt policy | Lower to medium | What breaks under a sudden repricing and credit migration? |
| Hot house world | Limited policy | High and rising | Where do physical losses concentrate in collateral and insurance? |
NGFS climate scenarios · Network for Greening the Financial SystemIFRS S2 Climate-related Disclosures · ISSBTCFD recommendations · Financial Stability Board TCFDPrinciples for the effective management of climate-related financial risks · Basel Committee on Banking Supervision
08Connections
Topics that rely on this method.
09Stewardship
Who maintains the method.
Rêveberiya xetera pergalî stewards scenario design and stress testing for the Consortium and reviews how it is applied across platforms.
10Girêdayî
Ev rûpel li ser Konsorsiyûmê te ber bi kû ve dibe.
11Pirs
Pirs û bersiv.
What are the limits of scenario design and stress testing in this field?
Scenario choice can reflect prevailing assumptions and miss novel combinations. Results depend on how participants and models represent responses.
How are results checked?
Scenarios are reviewed for plausibility, internal consistency and severity relative to history. Exercise outcomes are compared with actual events when they occur.
Are the values on this page real?
The data names, roles and checks are real descriptions of practice. The canvas shows a design of the method’s use, not a run; no result is reported here.
Where else is this method applied?
Çavdêrxaneya canonical method page lists every platform that applies it.
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