ET Risk Toolbox


The first element of the toolbox are reference decarbonisation scenarios. The ET risks project has developed two reference transition scenarios tailored for financial risk and scenario analysis. The first represents a limited climate transition extending current and planned policies and technological trends (e.g. an IEA NPS trajectory). This scenario is associated with a 3°-4°C decarbonisation range. The second, represents an ambitious climate transition. The scenario expands on the data from the IEA 450S/2DS, thus seeking to approximate an outcome associated with a 2°C transition.

These scenarios present over 30 risk-related indicators for the most relevant key value drivers (production and technology, market pricing and policy signals). The scenarios cover 8 of the most energy-intensive sectors and can be used for free by any interested party. Analysts can thus integrate the scenarios in their valuation and risk models and companies can use them to respond to the FSB TCFD recommendations or shareholder pressure on scenario analysis.


The second element in the toolbox is the exploratory development of asset-level databases. This includes the initial consolidation of asset-level information across six energy-relevant sectors (power, automotive, steel, cement, aircraft, and shipping) using existing proprietary and non-proprietary datasets. This is done for assets that account for >2/3 of global GHG emissions in each of the six the sectors. The initial estimation of Committed Cumulative Carbon Emissions (CCCE) for the assets identified is also undertaken, together with the creation of a new database of technological options to Reduce Committed Cumulative Carbon Emissions (RCCCE).

The main purpose of these databases is to explore the potential of asset-level data and encourage the adoption of asset-level based approaches, as well as the CCCE concept, by financial institutions and other stakeholders.


The third element in the toolbox are financial models. The ET Risk project integrates the developments in scenarios and data to four different types of models: company risks, valuation, credit risk and climate alignment models. Four project partners are involved in the integration of transition-related parameters in their models:  The CO-Firm in its net margin impact model Climate Xcellence; Kepler-Cheuvreux in its equity valuation models; S&P Market Intelligence in its credit risk models; and 2°Investing Initiative in its alignment model, the 2°C portfolio test.

Given the commercial nature of some of the models, the results will be disseminated in different ways including road-testing, industry reports, and white papers.