Gimar special topic edition the impact of climate change on the financial stability of the insurance sector

Energy mix (hot house)
Coal
Oil
Gas
Nuclear
0
100
200
300
400
500
600
700
800
900
2015
2020
2025
2030
2035
2040
2045
2050
Energy mix (below 2 degrees)
Graph 10:
NGFS scenarios – illustration on key variables
Source: NGFS (2021)
38
0
100
200
300
400
500
600
700
800
2015
2020
2025
2030
2035
2040
2045
2050
US
D201
0 
pe
r tCO
2
Carbon price
Below 2°C
Delayed transition
Current policies
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
2015 2020 2025 2030 2035 2040 2045 2050
Mt 
CO
2 p
er 
yea
r
Carbon dioxide emissions
Below 2°C
Delayed transition
Current policies
0
100
200
300
400
500
600
700
800
2015
2020
2025
2030
2035
2040
2045
2050
US
D201
0 
pe
r tCO
2
Carbon price
Below 2°C
Delayed transition
Current policies
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
2015 2020 2025 2030 2035 2040 2045 2050
Mt 
CO
2 p
er 
yea
r
Carbon dioxide emissions
Below 2°C
Delayed transition
Current policies
Cristal, if possible can we stretch the legend from left-hand graph across both graphs (or remove and paste below)? It applies to both.
0
100
200
300
400
500
600
700
800
900
2015
2020
2025
2030
2035
2040
2045
2050
Energy mix (hot house)
Coal
Oil
Gas
Nuclear
Non-biomass renewables|Solar
Non-biomass renewables|Hydro
Non-biomass renewables|Wind
Biomass
0
100
200
300
400
500
600
700
800
900
2015
2020
2025
2030
2035
2040
2045
2050
Energy mix (below 2 degrees)
Non-biomass renewables|Solar
Non-biomass renewables|Hydro
Non-biomass renewables|Wind
Biomass

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31
Existing methodologies do not standardise the 
features distinguishing an orderly from a disorderly 
transition scenario. A disorderly scenario could 
consist of either late or abrupt policy action,
with various degrees of macroeconomic spillover 
and disruption to the real economy. In contrast, 
an orderly transition may involve more moderate 
sectoral impacts and limited second-round 
effects on the real economy. To help differentiate 
between the two scenarios, this report assumes 
that an orderly transition involves half the market 
risk found in the disorderly scenario. Therefore 
the disorderly stress factors implemented in the 
existing literature have been multiplied by 0.5 
to derive the stress factors used in the orderly 
transition scenario.
Corporate bonds, and loans and mortgages
In a number of studies, distinguishing stress 
factors across asset classes has been more 
challenging than across sectors. For instance, 
abundant historical market data for equities 
make it easier to econometrically estimate the 
co-movement of equities with macroeconomic 
variables affected by a carbon tax. It can be more 
difficult to apply similar quantitative methods for 
non-traded assets such as loans and mortgages. 
Certain studies, including that of the Bank of 
England (BoE) and EIOPA, have simplified the 
assumptions that derive the shock for assets 
such as corporate bonds as a fixed proportion of 
equity shocks in the same sector. Work is under 
way to derive a widely accepted and harmonised 
methodology for use within the industry and by 
supervisory authorities. In the interim, this report 
uses the same approach as taken by the BoE 
and EIOPA for the corporate bonds and loans and 
mortgages asset classes, with a fixed multiplier of 
0.15 compared to the assumed impact on equities 
(for both orderly and disorderly transitions).
4.1.2.2