Climate-related impacts are becoming increasingly evident, with global temperatures already over 1.1°C above pre-industrial levels. Scientific consensus emphasizes that every incremental rise in temperature exacerbates weather extremes, posing severe risks to economies and societies. To combat these threats, 196 Parties to the Paris Agreement committed to limiting global warming to well below 2°C, preferably to 1.5°C. Achieving this ambitious target requires strict adherence to the remaining carbon budget and reaching net-zero emissions by 2050. The urgency of this decade is highlighted by the Intergovernmental Panel on Climate Change (IPCC), which has identified immediate and significant reductions in greenhouse gas (GHG) emissions as critical to staying within the 1.5°C threshold.
Against this backdrop, financial institutions must act decisively to drive decarbonization across sectors, leveraging tools like scenario analysis to assess climate risks and support a transition to a low-carbon economy. Recognizing this need, the United Nations Environment Programme Finance Initiative (UNEP FI) developed this report to provide financial practitioners with a detailed understanding of IPCC-assessed scenarios for limiting warming to 1.5°C with no or limited overshoot.
The purpose of this report is to enhance the financial sector’s capacity to interpret and apply climate scenarios effectively. It highlights the critical milestones identified in scenario pathways, explains their implications for emissions, energy demand, and financing needs, and examines their practical use in risk assessment and mitigation strategies. By addressing common questions and uncertainties, the report offers actionable guidance to financial institutions, enabling them to integrate these scenarios into decision-making processes and contribute meaningfully to the global climate agenda.