Network for Greening of the Financial System (NGFS) climate scenarios have become a financial industry standard. We employ their latest iteration to illustrate the impact on the corporate PD projections from the Moody’s Climate Adjusted Expected Default Frequency model. The model links global and sectoral dynamics with physical risk assessment and emissions at the company level.

Modelling challenges include combining physical risk across climate hazards as well as deriving firm-level metrics from the transition risk implied sectoral pathways.
Regulators across the globe require usage of different Integrated Assessment Models to characterize transition risk. Our modular approach enables us to quantify the impact of these modelling choices.

• Climate Adjusted Corporate PD Modelin a nutshell
• NGFS Scenarios’ Evolution: Net Zero and Nationally Determined Contributions imply lower emissions
•  Conceptual challenges for physical risk scoring
•  From sectors to the firm level: Moody’s Transition Risk Oligopoly Model
•  Does the used IAM matter? GCAM vs REMIND
•  What’s next in the climate credit risk modelling