Fit for climate change with Climate Excellence

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Dr Nicole Röttmer
Partner, Climate Leader, PwC Germany
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PwC Tool "Climate Excellence" for climate scenario analysis

PwC's "Climate Excellence" tool for climate scenario analysis helps investors get their portfolios in shape for the risks and opportunities of climate change – and to fully exploit the potential for value growth, adequate risk management and communication with regulators and stakeholders.

Climate change, climate protection, and the climate itself have long since influenced economic developments. They harbor financial risks that are already becoming increasingly evident in the real and financial economy: From power plants that are built but not put into operation, to the electrification of private transport, to the increasing energy requirements for buildings.

In order to reduce the risks of climate-related influences on the financial market, the Task Force on Climate Related Financial Disclosures (TCFD), which was set up on behalf of the G20 finance ministers, recommends extended reporting by the real economy and financial sector on climate risks. Not without reason: financial experts believe that climate change could put assets worth USD 43 trillion at risk by the end of the century.

Why do you need to act?

The recommendations of the TCFD are becoming more relevant and are increasingly influencing the risk management requirements of financial institutions, as supervisory authorities are taking them up, for example in the ECB consultation paper on climate risks and the Non-Binding Guidelines on Climate Reporting (NBGL).

As a result of the EU Action Plan, the Network for Greening the Financial System and the increasing stakeholder pressure to integrate climate-related risks and opportunities, the question now also arises as to whether companies can retain their "license to operate" and thus prove themselves in the market.

By actively investing in the transformation, you, as an asset manager and asset owner, have the opportunity to contribute to sustainable value creation and at the same time benefit financially.

The following analysis steps and best practices are recognized: 

  • Analyze more than just one climate change scenario.
  • Determine the financial materiality of different climate scenarios across your portfolio and understand the risk and opportunity drivers of change – at least at the corporate level.
  • Study scenarios and their narratives carefully.
  • Understand the impact of all elements of the scenario, i.e. not only the effect of the CO2 price, but also the consequences of new technologies, changing demand or the removal of subsidies for fossil fuels.
  • Use the experience and the lessons learned and integrate them into your standard processes

"Climate change is transforming our economies. Only those who understand the risks, opportunities and cause-effect relationships can develop sustainable and credible strategies."

Dr. Nicole Röttmer, Partner, Climate Leader, PwC Germany

Your challenges

Numerous questions arise regarding climate change and its impact on the companies in your portfolios.

  • How material are climate risks in the future for my portfolios?
  • How can I protect myself against these risks?
  • How do I exploit future potential in my portfolios?
  • How do I compare with my competitors?
  • How can I efficiently implement e.g. the TCFD and NGBL recommendations in my own reporting?

Our offer

PwC’s Climate Excellence tool helps to assess climate risks and opportunities

PwC has developed a climate scenario analysis tool to assess these questions quickly and reliably: Climate Excellence enables asset managers and asset owners to make the financial impact of climate risks and opportunities tangible for their portfolios. The tool analyzes opportunities and risks arising from various climate scenarios and energy system models.

Climate Excellence calculates the consequences of specific climate transition risks, such as changing prices, demand, technological advances or regulatory intervention. This enables asset managers and asset owners to holistically analyze their financial portfolios of up to 40,000 listed securities for climate risks. This insight provides the various stakeholder groups with the relevant information to integrate climate risks into their strategic decisions.

The Climate-Excellence Tool efficiently supports you in implementing these requirements:

Select scenarios

Choose from three different International Energy Agency (IEA) Energy Technology Perspectives (ETP) scenarios:

  • 2,7 degree Celsius Reference Technology Scenario (RTS)
  • 2 degree Celsius Scenario (2DS)
  • Beyond 2 degree Celsius Scenario (B2DS)

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Determining financial relevance in the overall portfolio

Heatmaps show you essential risks and opportunities for your portfolios for companies, sectors, regions, over time and scenarios.

 

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Study scenario descriptions thoroughly

Scenario narratives for better understanding.

 

 

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Derive risk and opportunity factors

You gain access to underlying risk drivers based on technological changes, changes in demand and prices and a range of regulatory measures.

 

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Use and integrate findings

You develop an understanding of the effects and of the winners and losers of transition. This enables you to make informed portfolio management, asset selection and adequate risk assessment.

 

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Your benefits

  • The tool has been tried and tested in the market for years - also in the real economy.
  • The analysis covers up to 40,000 listed titles.
  • The method was originally conceived by The CO-Firm and further developed together with leading financial institutions. At PwC, the coverage of all sectors and further financial securities was further developed and will be made available online step by step.
  • PwC has at its disposal validated databases on investment structures, technological optimization options and asset/technology costs, efficiency optimization and energy costs.
  • PwC's experts draw their knowledge from renowned studies and their own experience from working across countries and studies in many different sectors. We also draw on third-party databases where they can improve the analyzes.

Now available as a digital solution

PwC's experts have been using the Climate Excellence Tool for many years to advise asset owners and managers, banks and insurers, and companies in the real economy. Now the tool is also available directly as a digital solution in the PwC Store.

To the PwC Digital Store

"Climate Excellence creates the transparency needed to understand complex climate-related market dynamics and their effects. This is the basis for actively managing material risks along clearly identifiable risk drivers."

Dr. Nicole Röttmer,Partner, Climate Leader, PwC Germany

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Dr Nicole Röttmer

Dr Nicole Röttmer

Partner, Climate Leader, PwC Germany

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