Models are inherently a simplification of reality, constructed and estimated to facilitate decision-making in uncertain environments. Therefore, to incorporate novel concepts such as ESG criteria or climate considerations into decision-making processes, existing analytical tools must be re-evaluated, and new models developed to assess climate risk, with the aim of being used by businesses and the financial industry.
However, not all methodologies serve the same objective or have the same scope. For example, measuring greenhouse gas emissions is not the same as modeling scenarios aligned with specific science-based targets.
This chapter explores different methodological approaches, all of which are highly useful for defining a long-term strategic plan, and many of them are complementary.
Despite their complexity, climate models must respond with traceability and a certain degree of consistency to three fundamental objectives: first, they must facilitate a measure of exposure; second, they must help construct a path that marks the transition from the present to the ambition reflected in the Paris Agreement; and third, they must be useful for managing risks derived from climate change.
To achieve this, it is essential to have quality information and to improve knowledge and training on these topics.
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Juan Carlos Delrieu, Director of Strategy and Sustainability at the Spanish Banking Association
