Many parts of society are responding to the widespread consensus that the climate is changing and to scientific evidence on the potential impacts of climate change. Central Banks and financial institutions have introduced measures to assess climate risks to the financial system. Likewise, companies in the real economy are changing their business models and driving forward investment in net-zero transition to respond to the challenges and opportunities posed by climate change. Assessing how best to respond and testing the resilience of strategies and business models depends on exploring how the future could unfold.
The Task Force on Climate-related Financial Disclosures (TCFD) finds that the Agriculture, Forestry and Other Land Use (AFOLU) sector is steadily trending towards more quantitative scenario analysis. Still, reporting remains inconsistent and not comparable due to varying scenario applications. In one assessment, more than two-thirds of AFOLU companies conduct scenario analysis, but most use scenarios that do not explicitly focus on the AFOLU sector. New tools and support are needed for companies to effectively use scenario analysis to assess risks and opportunities, build transition plans and support TCFD-aligned disclosures.
Scenario analysis enables companies to explore possible futures and drive discussions with risk management, procurement, strategy and other parts of the business around:
Reporting & disclosure - a basis for TCFD reporting, investor conversations and alignment with specific temperature targets.
Strategic adaptation & resilience- inform assessments of business model resilience and understand how transition risks and opportunities could materialize.
Financial impact - a starting point for describing how transition risks and opportunities can link to financial impacts.
Public & policy engagement - use to engage with policymakers and as a tool for policy discussions based on scientific data.
WBCSD convened leading Food, Agriculture and Forest Products companies to develop a set of new sector-relevant climate transition scenarios to assess strategic resilience to climate risk and inform disclosures in response to the TCFD’s recommendations. The scenarios will be available through an online tool enabling users to navigate by specific variables (e.g., commodities and regions) and compare, visualize and download output data (e.g., production, prices and emissions). The Climate Scenario Tool will be accompanied by a set of guides, including a Scenario Analysis and Application Guide describing the use cases for the scenarios and recommendations for transition planning.