Our dedicated sustainability teams analyse the exposure of different sectors and industries to a number of sustainability challenges using a series of scenarios. This is used to provide actionable intelligence on forward-looking risks and opportunities for some investment teams.
In our materiality mapping, we model the exposure of industries to climate change and other megatrends, under 3 different main scenarios:
(1) A business-as-usual scenario, based on current policies
(2) A middle of the road scenario, based on limited improvement in policy ambition (2.6C) with parameters included to adjust this scenario for a "delayed policy response"
(3) A sustainability scenario aligned with the Paris Agreement, based on a temperature increase of 1.8C
The interim conclusions from our materiality analysis highlight that transitional risks increase in the more sustainable, Paris-aligned scenario. Over the longer term, this scenario does, however, feature lower physical risks. In the business-as-usual scenario, transitional costs are lower, but this is offset by the creation of reputational and liability risks, that could pose an existential threat to responsible industries.