As part of the preparation of a TCFD report, financial institutions need to establish a measurement framework.
Based on our methodological approach for Climate related stress assessment we propose a 4-step approach :
- Scenarios: identify and organize the possible futures as considered by the IPCC and other bodies
- Impact: evaluate the impact of each scenario on each country and each economic sector.
- Sensitivity: analyse the sensitivity of exposure units (e.g. business segments) to transition and physical risk, using proxies when the detailed information is not available.
- Aggregation: merge the individual impacts derived from the anticipated scenarios applied to the portfolio of sensitive units in order to get a range of enterprise wide potential impacts
