NGFS scenarios

NGFS scenarios are the reference climate trajectories developed by the Network for Greening the Financial System, a network of central banks and supervisors created in 2017. They set out several contrasting futures depending on the scale and sequencing of climate action: orderly transition, disorderly transition, hot-house world where action remains insufficient. Each scenario combines assumptions on climate policy, carbon price, emission trajectory and physical impacts, providing a common framework for prudential stress test exercises. For insurance, these scenarios structure the assessment of transition and physical risks on the balance sheet, assets and liabilities alike, and feed climate value at risk. Their value lies in the standardization they bring, enabling comparison across institutions; their limitation lies in the deep uncertainty of long-term trajectories, which makes results sensitive to scenario choice rather than to reliable forecasts.