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Acute climate risks in the financial system: examining the utility of climate model projections

Sunset skyline with chimney emitting smoke or steam




Key Takeaways

  • Global mean temperature provides little insight on how acute risks likely material to
    the financial sector will change at a city-scale.
  • ‘Top-down’ approaches are likely to be flawed when applied at a granular scale. Most fundamentally, uncertainty associated with projections of future climate extremes must be propagated through to estimating risk.
  • Authors encourage a review of existing top-down approaches before they develop into de facto standards and note that existing ‘bottom-up’ approaches – such as catastrophe modelling and storylines – are more likely to enable robust assessment of material risk.


Dr Nicola Ranger (CGFI) co-authored this paper on climate model projections, which focused on demonstrating issues inherent in applying global ‘top-down’ climate scenarios to explore financial risks at the city-scale.

Authors used data mined from the Coupled Model Intercomparison Project (CMIP) to determine the degree to which global mean temperature estimates can be used to estimate changes in annual rainfall and temperature extremes, as well as compound events (heatwaves and drought; extreme rain and strong winds).

Citations include the Economic Report of the President 2023 – read more.