Helping clients meet their business challenges begins with an in-depth understanding of the industries in which they work. That’s why KPMG LLP established its industry-driven structure. In fact, KPMG LLP was the first of the Big Four firms to organize itself along the same industry lines as clients.

How We Work

We bring together passionate problem-solvers, innovative technologies, and full-service capabilities to create opportunity with every insight.

Learn more

Careers & Culture

What is culture? Culture is how we do things around here. It is the combination of a predominant mindset, actions (both big and small) that we all commit to every day, and the underlying processes, programs and systems supporting how work gets done.

Learn more

NGFS: A primer on climate scenarios

Network for Greening the Financial System climate scenarios can help you manage transition risk.



Established in December 2017, the Network for Greening the Financial System (NGFS) represents a consortium of central banks, financial institutions, and supervisors committed to enhancing the role and capability of the financial sector to identify, measure, and manage environmental, and climate-based risks; and to mobilize capital and financial investments to support the transition to a sustainable economy in alignment with the goals established in the Paris Climate Accord1. The NGFS serves as a voluntary platform to promote best practices and methods with respect to climate- and nature-risk management, and to devise standardized climate change stress tests and climate scenarios for use both within and outside of its membership. This article provides a primer on the climate scenarios developed by the NGFS.

NGFS climate scenarios

The NGFS, in partnership with leading academic institutions,2 have developed six distinct climate scenarios that provide a global, harmonized, and common framework for quantifying the impacts of climate change to the economy and global financial system. These climate scenarios, listed below, represent a wide array of possible climate futures. A complete description of these scenarios can be found in the NGFS technical documentation.3

  • Net zero 2050
  • Below 2 °C
  • Divergent net zero
  • Delayed transition
  • Nationally determined contributions (NDCs)
  • Current policies

The NGFS categorizes climate scenarios into one of three transition types including Orderly, Disorderly, or Hot house world, based on the climate scenario narrative and modeled global response to climate change. NGFS climate scenarios span varying degrees of climate change mediated transition and physical risk. Table 1 provides a qualitative summary of high-level indicators of climate induced risk. For scenarios in the Orderly transition, the global response to climate action is immediate and coordinated, resulting in low variability in regional climate policies, a moderate-to-fast pace of technological change, and a modest deployment of Carbon Dioxide Removal (CDR4) technologies. These actions limit global warming to < 2 °C, and thus result in low physical risk and low-to-moderate transition risks. In the Disorderly transition, failure to coordinate climate policy across sectors and/or a delay to climate action may result in significant regional differences in climate mitigation and strategy, as well as periods of rapid technological change. Climate scenarios in the Disorderly case can limit warming to < 2 °C resulting in low physical risks but may demonstrate higher transition risks compared to the Orderly case. Scenarios in the Hot house world case reflect climate ambitions extrapolated from nationally determined contributions or current climate policies. For scenarios in the Hot house world case, global action on climate change is incremental and ultimately insufficient to limit significant global warming, resulting in >~2.5 °C+ by the end of the century. Hot house world scenarios demonstrate low transition risk but result in severe physical risks including irreversible impacts such as increases in global sea level.

Table 1. NGFS Climate Scenarios – Qualitative Macro-Financial Risk Assessment (adapted from Ref3)

Transition typeClimate scenarioPolicy ambitionPolicy reactionTechnology changeCDRRegional policy variation
OrderlyNet zero 2050

1.5 °C

Immediate and smooth

Fast change

Medium use

Medium variation

Below 2 °C

1.7 °C

Immediate and smooth

Moderate change

Medium use

Low variation


Divergent net zero

1.5 °C

Immediate but divergent

Fast change

Low use

Medium variation

Delayed transition

1.8 °C


Slow/Fast change

Low use

High variation

Hot house worldNationally determined
contributions (NDCs)

~2.5 °C


Slow change

Low use

Low variation

Current policies

3 °C+

None – current policies

Slow change

Low use

Low variation


The NGFS evaluates each climate scenario independently across three separate Integrated Assessment Models (IAMs), see Table 2. IAM’s are a class of scientific computational modeling that captures interactions between human activities, society, economy, and earth systems. IAM’s rely on key assumptions regarding the future state of the world, which encompass policy, technological, and societal dimensions (such as policy targets, energy costs, population growth, etc.). These assumptions may be defined based on the climate scenario narrative (e.g., setting specific constraints on global warming), as well as exogenous and endogenous modeling assumptions. For each climate scenario, NGFS aligns the three IAMs to reflect consistent socioeconomic conditions and climate policy assumptions. However, IAM’s may differ in several key regards such as their model formulation, spatial and temporal resolution, sectoral granularity, technology representation, climate mitigation options, and other key variables (see Table 2), resulting in differences in climate outcomes across IAMs.

NGFS reports modeling results across unique combinations of IAM’s and climate scenarios, which enables stakeholders to explore model and scenario uncertainty by: (1) for a fixed climate scenario comparing climate outcomes across multiple IAMs, or (2) for a fixed IAM comparing climate outcomes across climate scenarios. 

Table 2. Integrated Assessment Models used in constructing NGFS Climate Scenarios (adapted from Ref3)

Assessment Model
Global Change
Analysis Model
MESSAGE + ix modeling platform
/Global Biosphere Management

Regional Model of Investment
and Development/Model of
Agricultural Production and its
Impact on the Environment


University of Maryland (UMD)

International Institute for Applied
Systems Analysis (IIASA)

Potsdam Institute for Climate
Impact Research (PIK)

Solution concept

Partial equilibrium (price elastic demand)

General equilibrium (closed economy)

REMIND: General Equilibrium (closed economy)
MAgPIE: Partial Equilibrium model of the agriculture sector


Recursive dynamic (myopic)

Intertemporal (perfect foresight)

REMIND: Inter-temporal (perfect foresight)
MAgPIE: recursive dynamic (myopic)

Solution method

Cost minimization

Welfare maximization

REMIND: Welfare maximization
MAgPIE: Cost minimization

Spatial resolution

32 World regions

11 World regions

12 World regions

Temporal resolution

Base year: 2015
Time steps: 5 years
Horizon: 2100
Base year: 1990
Time steps: 5 (2005–2060) and 10 years (2060–2100)
Horizon: 2100
Base year: 2005
Time steps: 5 (2005–2060) and 10 years (2060–2100)
Horizon: 2100

Technology representation

58 Conversion technologies

64 Conversion technologies

50 Conversion technologies

The number of mitigation
options considered

Demand side: 14
Supply side: 18
AFOLU5 options: 8
Demand side: 16
Supply side: 20
AFOLU5 options: 8
Demand side: 15
Supply side: 17
AFOLU5 options: 7


Climate scenario analysis

Climate scenario analysis is a powerful tool for quantifying and contextualizing the impact of human development and societal changes on the earth’s global climate system. As the drivers for climate change are deeply embedded in human-environmental systems, climate scenario analysis enables a broad comparison of climate outcomes across different ensembles of environmental, social, political, technological, economic, and cultural change. Moreover, climate scenario analysis can aid central banks and supervisors in understanding the long-term physical and transition risks to the economy and financial system across possible climate futures. To demonstrate the utility of this perspective, Figure 1 highlights the physical-transition risk tradeoff in NGFS climate scenarios at the end of the century (2100).

Figure 1. Climate-Mediated Transition and Physical Risk Tradeoff6


Figure 1. Climate-Mediated Transition and Physical Risk Tradeoff6


Figure 1. Climate-Mediated Transition and Physical Risk Tradeoff6

Here, global mean temperature (°C rel. to 1850–1900) and carbon price (US$2010/t CO2) are used as proxies for climate-mediated physical and transition risks, respectively. The evolution of the physical-transition risk tradeoff can guide and empower financial stakeholders in their investment decisions, portfolio management, and risk-management practices.   

KPMG has extensive experience in climate scenario analysis and climate-stress testing as well as deep industry knowledge. Our risk consulting professionals can help you:

  • analyze climate risk across a variety of climate futures
  • navigate the complex and fast-changing regulatory landscape
  • develop custom solutions to fit your company’s needs
  • transform climate-mediated risk into a lasting competitive advantage.
  1. Information regarding the origin and purpose of the NGFS can be found at NGFS climate scenario results and materials showcased in this article are based on reported values from NGFS Phase 2, and can be accessed through the NGFS Scenario Explorer, terms and conditions may apply. See
  2. Potsdam Institute for Climate Impact Research (PIK), International Institute for Applied Systems Analysis (IIASA), University of Maryland (UMD), Climate Analytics (CA), Swiss Federal Institute of Technology in Zurich (ETHZ), and National Institute of Economic and Social Research (NIESR)
  3. NGFS, “NGFS Climate Scenarios Database” Technical Documentation V2.2 (June 2021)
  4. NGFS defines CDR as “Anthropogenic activities removing CO₂ from the atmosphere and durably storing it in geological, terrestrial, or ocean reservoirs, or in products. It includes existing and potential anthropogenic enhancement of biological or geochemical sinks and direct air capture and storage but excludes natural CO₂ uptake not directly caused by human activities."
  5. AFOLU: Agriculture, Forestry and Other Land Uses
  6. Results are shown for combinations of three IAMs (GCAM, MESSAGEix-GLOBIOM, REMIND-MAgPIE) and six NGFS climate scenarios, based on scenarios reported in NGFS Phase 2. A carbon price is not reported in the ‘Current Policies’ climate scenario evaluated by GCAM, a price of zero is assumed. 

Explore more

Meet our team

Image of Adam Levy
Adam Levy
Principal, Modeling & Valuation, KPMG US
Image of Greg Zaimes
Greg Zaimes
Sr Associate Advisory, Modeling & Valuation, KPMG US

Thank you!

Thank you for contacting KPMG. We will respond to you as soon as possible.

Contact KPMG

Use this form to submit general inquiries to KPMG. We will respond to you as soon as possible.

By submitting, you agree that KPMG LLP may process any personal information you provide pursuant to KPMG LLP's Privacy Statement.

An error occurred. Please contact customer support.

Job seekers

Visit our careers section or search our jobs database.

Submit RFP

Use the RFP submission form to detail the services KPMG can help assist you with.

Office locations

International hotline

You can confidentially report concerns to the KPMG International hotline

Press contacts

Do you need to speak with our Press Office? Here's how to get in touch.