The Central Climate Scenario Workshop Group summarises the first of a series of workshops that aims to share insights on current thinking on what could constitute climate central ‘best estimate’ scenarios.
Climate change and the transition to a net zero have material implications for the wider economy, business strategy and day-to-day operations across all sectors. These impacts will increasingly be reflected in financial markets.
This will highlight the importance for financial institutions to understand how climate-related risks and opportunities shape corporate strategy, risk management practices, and the design of stress scenarios required for actuarial capital management and reserving.
To support this, we convened a series of expert-led workshops bringing together senior UK insurance actuaries and academics. The aim is to share insights on current thinking on what could constitute climate central ‘best estimate’ scenarios, one of the PRA’s SS 5/251 scenario analysis requirements section 4.56: “Firms should assess impacts on their future revenues and profitability under relevant ‘central case’ scenarios”.
This blog summarises the findings from the first workshop. While this exercise cannot produce a single answer, given the inherent uncertainty, it seeks to articulate and socialise key expert perspectives that can support firms in developing their own climate central scenarios. This blog does not represent specific views of any of the participants, their organisations nor affiliations.
Although the Institute and Faculty of Actuaries (IFoA) and others have highlighted important gaps and challenges in traditional climate scenario modelling, there remains relatively little material on defining climate central scenarios.
This gap is particularly pronounced when considering there are few of published (NGFS, IEA, IPR) climate scenarios where the world makes some progress but fails to meet the Paris Agreement goals of remaining well below 2oC.
Those scenarios may be the most central given the UN Emissions Gap Report 2025 estimates global warming projections of 2.3 to 2.5°C based on full implementation of Nationally Determined Contributions (NDCs) and warming of 2.8°C on current policies.
Developing climate pathways that reflect both the physical climate and future global economy evolution is a complex and interconnected ‘wicked’ problem. Uncertainties span Earth system science dynamics, policy responses, technology innovation and geo-politics.
We need to be clear that scenarios are not forecasts. All scenarios are inherently approximate and can only be illustrative of potential future rather than precise predictions. Expert judgement is essential to identifying key drivers and direct initial estimates, while recognising that experts can differ in their assessments. With these challenges in mind, the core outputs of the workshops were structured around the following objectives.
Participants were generally comfortable providing views out to 2050 but found it increasingly difficult thereafter. By 2100, the ranges widened substantially, and most participants highlighted significant personal uncertainty on areas such as emission pathways, socio-economic behaviours and adaptive response even before attempting to form a group view.
All participants agreed that the central case would exceed 1.5°C by 2050. There was broad consensus for warming to be between 1.7°C and 2.3°C (over pre-industrial mean). 2°C was probably the most common estimate, but with strong advocates on either side.
The majority estimated the decline to be between 0% and 25% by 2050 compared to 2024. This was reflective of balancing positive momentum in renewables against ongoing challenges in sectors such as transport, agriculture, and heavy industry. Emission pathways beyond 2050 were considered much harder to judge and subject to very significant geopolitical and technological uncertainty.
There was a wide range of answers. The most common central estimate for 2100 was around 3°C, with significant recognition of tail risks, with high-end scenarios reaching 4°C and low-end possibilities of an ‘overshoot’ followed by a return to lower warming levels (for example 1.5°C) if negative emissions or geoengineering are deployed at scale. Many participants acknowledged the wide range of what they considered plausible.
The majority placed the central estimate at 3.0°C, in line with mainstream scientific consensus, but acknowledged a plausible range from 2 to 5. Higher values were appropriate for stress testing and tail-risk analysis. This will be revisited following the extensive review within the ‘Parasol Lost: Recovery plan needed’ report which noted that recent observational and modelling studies suggest ECS2 may be higher than the central [3.0°C] estimate.
Implied temperature pathways meant that physical risks will certainly increase, with adaptation pressures mounting across infrastructure, supply chains, and the insurance sector. Coral reefs are already past their tipping point. The workshop noted the need for central cases to consider both physical and social tipping points – abrupt changes in systems that could amplify costs and disrupt orderly transitions. What’s more, geopolitical fragmentation could further amplify these risks and hinder coordinated responses. Tipping points will be considered in a future deep-dive workshop.
Without significant emissions reduction beyond current policies, meeting Paris-aligned goals would need significant carbon dioxide removal (CDR) and SRM efforts. While SRM’s potential was recognised, there was significant variation on participants’ outlook for timelines and likelihood of scaled-up deployment. Material impacts could be as soon as 2045, and level of deployment creates significant uncertainty for post-2050 temperature pathways.
The future is multi-modal, with several ‘bifurcating’ elements – such as ecosystem tipping points, geopolitical responses, and technological breakthroughs – the choices of which could lead to very different ‘central case’ outcomes. Actuaries are encouraged to acknowledge these uncertainties and complexity, and to consider if multiple scenarios are required to reflect ‘the central case’.
Three principal dimensions emerged as the core drivers of central case estimates. These aspects will be subject to further investigation at future workshops.
The Central Climate Scenario Workshop Group consisted of Oliver Bettis, Loubna Benkirane, Ruth Bryson, Zahrah Fauzee, Charlie Howell, Aled Jones, Laurie Laybourn, Jason A. Lowe, Hetal Patel, Nicola Ranger, Nick Spencer, Sandy Trust, and Wendy Walford who attend in a personal capacity.
