NGFS Climate Scenarios for central banks and supervisors - Phase V

Notice to users of NGFS long-term climate scenarios

The NGFS long-term climate scenarios are a set of forward-looking pathways designed to explore how the global economy and financial system might evolve under different levels of climate policy ambition and physical climate impacts over the rest of the 21st century. They were developed by the Network for Greening the Financial System (NGFS) to provide a consistent analytical basis for assessing climate-related financial risks and opportunities.

The academic paper underpinning the physical risk estimates in Phase V of NGFS long-term scenarios (released in November 2024), Kotz et al. (2024), has received academic critiques (see first and second Matters Arising) as part of the post-publication review process at Nature. Therefore, users should be aware of this academic debate pertaining specifically to the Phase V physical risk methodology when interpreting and applying Phase V results, alongside the broader limitations of physical risk estimates already detailed in NGFS documentation.

The affected variables are those reflecting physical loss estimates from Kotz et al. (2024) in Phase V of NGFS long-term scenarios. This includes: all outputs of “Integrated Physical Damages” scenarios by REMIND-MAgPIE, all “physical” and “combined” (i.e. combined physical and transition damages) outputs from NiGEM, as well as post-processed or downscaled outputs for GDP damages from the damage function (i.e. GDP change and Net GDP variables referring to "Kotz-Wenz"). All other variables, as well as the other physical risk estimates presented in the Climate Impact Explorer, remain unaffected. The outputs of NGFS short-term scenarios and previous phases of NGFS  long-term scenarios are not impacted, as they do not rely on the Kotz et al. (2024) paper.

The NGFS is constantly working to further improve the scenarios, including with regard to physical risks. It cannot be excluded that the economic effects of climate change might turn out to be more severe than anticipated in the NGFS scenarios, for instance, if certain tipping points are reached. Thus, users should also take into account the tail risks of climate change, along with other risks such as nature-related ones, which are not necessarily captured by these scenarios.

Users are reminded that neither the NGFS, nor its member institutions, nor any person acting on their behalf, is responsible or liable for any reliance on, or for any use of the NGFS scenarios and/or supplementary documentation. This also applies to the use of the data produced under the scenarios – see section 5 in  https://data.ene.iiasa.ac.at/ngfs/#/license. Thus, while the NGFS climate scenarios are certainly a helpful tool, they do not alleviate the responsibility of users, including banks and other (financial) organisations, to design and implement their own risk management frameworks.