• Intergovernmental Panel on Climate Change (IPCC) scenarios provide the scientific climate backbone, combining socio-economic pathways and radiative forcing levels to describe how the physical climate can evolve.
• Network for Greening the Financial System (NGFS) scenarios use similar underlying models as the IPCC, such as integrated assessment models (IAMs), to build their outputs and then translate IAM results into regional and sectoral detail, providing macro-financial and transition pathways for supervisors, banks and insurers and showing how different climate and policy futures affect economies and portfolios.
• Location Risk Intelligence by Risk Management Partners helps banks, insurers and supervisors consistently use IPCC and NGFS scenarios together by turning IPCC-aligned hazard projections into asset-level risk metrics that feed into portfolio scenario analysis and climate stress testing.

If you are a risk manager, you probably live in a world of acronyms. IPCC. NGFS. SSPs. NDCs. Climate scenarios now show up in supervisory guidance, disclosure rules and internal risk frameworks across banks and insurers. Everyone talks about IPCC and NGFS scenarios, but relatively few people in financial institutions work with the assumptions and models behind them. The danger is simple: if you misunderstand the tools, you still get numbers, but you get the wrong story. That is how strategy quietly drifts into wishful thinking.

This article unpacks how IPCC and NGFS scenario frameworks relate to each other, and how Location Risk Intelligence by Risk Management Partners uses that structure to transform climate pathways into actionable, location-specific risk insights for financial institutions.

The Intergovernmental Panel on Climate Change provides the scientific backbone. Under the IPCC definition, scenarios are devices for analysing situations in which outcomes are uncertain. The current generation combines two ingredients:

First, the Shared Socio-economic Pathways describe how the world might evolve. SSP1 sketches a sustainability focused world. SSP2 follows a more conventional path with moderate progress. SSP3 is characterised by regional rivalry and fragmentation. SSP4 focuses on inequality, and SSP5 shows fossil-fuelled development with high energy demand.

Second, Representative Concentration Pathways specify the level of radiative forcing in 2100 and therefore the associated warming level. RCP1.9 and RCP2.6 represent very stringent and stringent mitigation. RCP4.5 and RCP6.0 are intermediate pathways. RCP8.5 represents very high warming.

In the Sixth Assessment Report, both strands combine into scenarios such as SSP1-1.9, SSP1-2.6, SSP2-4.5, SSP3-7.0 and SSP5-8.5. These pathways first describe greenhouse gas emissions and atmospheric concentrations over time, which in turn drive physical climate variables such as global surface air temperature, changes in land precipitation, Arctic sea ice and global mean sea level. This is the language of climate physics.

The Network for Greening the Financial System (NGFS) uses similar underlying climate and integrated assessment models as the IPCC and couples them with macroeconomic and financial models to ask a different question: what do climate change and climate policy mean for the real economy and the financial system?

NGFS scenarios combine physical risk, policy choices, technology and behavioural change into seven global pathways. Net Zero 2050, Below 2 °C and Low Demand describe an orderly transition where policies tighten in time and markets adjust. Delayed Transition and Fragmented World illustrate disorderly or too-little-too-late responses with high transition and physical risk. Nationally Determined Contributions and Current Policies represent hot-house worlds with pledged or currently implemented policies only, leading to strong physical impacts.

The outputs are macro-financial: GDP, inflation, unemployment, sectoral output, carbon prices, energy mix and selected physical risk indicators such as heatwaves, floods or droughts. This is the language of supervisors, banks and insurers.

The important point is that IPCC and NGFS scenarios build on a consistent body of climate science, but they are not identical or paired one-to-one. Neither framework assigns probabilities to individual scenarios; both explore plausible futures across different temperature ranges. In this article we therefore speak of “rough links” between IPCC and NGFS pathways to give users orientation, not to suggest exact equivalents.

Location Risk Intelligence translates Risk Management Partners’ proprietary natural hazard and climate models, built on Munich Re’s decades of NatCat expertise and aligned with IPCC pathways, into asset-level risk metrics. Users can explore different warming pathways and time horizons to see how exposure changes for each specific location. These physical insights can then be mapped to regulatory and portfolio questions shaped by frameworks such as NGFS – even though Location Risk Intelligence does not run NGFS models directly.

The result is a bridge: IPCC scenarios define how the climate can evolve. NGFS scenarios describe how economies and sectors respond. Location Risk Intelligence shows what that combination means for the assets, networks and communities that organisations are responsible for. When that picture is clear, discussions about adaptation, risk transfer and strategic change stop being abstract. They become concrete decisions with transparent trade-offs.

Climate scenarios will never remove uncertainty – they are not built for that. Their value lies in turning an overwhelming problem into structured choices. Location Risk Intelligence provides exactly that: IPCC-aligned climate insights to understand, measure and manage climate risks.