NGFS releases its first short term climate scenarios

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🗞️ Driving the news: The Network for Greening the Financial System (NGFS) has launched its first-ever short-term climate scenarios, providing central banks and financial supervisors with new tools to assess the near-term impacts of climate risks on economies and financial systems
• The scenarios focus on a five-year horizon and are designed to improve climate-related stress testing and risk analysis across the financial sector

🔭 The context: Established in 2017, the NGFS supports the global financial system in aligning with the Paris Agreement by helping integrate climate risks into macroeconomic and financial oversight
• While its previous long-term scenarios informed climate policy and transition planning, the new short-term scenarios address an urgent gap by modelling climate-related risks over a business-relevant timeframe, with a specific focus on shocks such as extreme weather and sudden policy shifts

🌍 Why it matters for the planet: By equipping financial institutions with short-term scenario tools, the NGFS enables faster integration of climate risk into decision-making
• This is crucial to protecting economic stability as the impacts of climate change — both physical and regulatory — accelerate
• The framework promotes preparedness and capital reallocation toward resilient, low-carbon investments, making it instrumental in operationalizing global net-zero pathways

⏭️ What's next: The four scenarios will serve as a foundation for immediate climate stress testing and financial supervision across global markets
• Policymakers and central banks are expected to incorporate these models into their regulatory frameworks and macroprudential assessments
• The NGFS also plans to refine and update these tools to reflect evolving climate and economic conditions, with broader adoption anticipated by year-end

💬 One quote: “The NGFS short-term scenarios are a vital instrument for conducting risk assessments and making informed decisions with greater confidence,” — Sabine Mauderer, NGFS Chair

📈 One stat: The “Disasters and Policy Stagnation” scenario assesses the macroeconomic fallout of compound extreme weather events over a five-year window, modeling their impact on supply chains, inflation, and financial stability

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