The NACE – CPRS – IAM mapping: A tool to support climate risk analysis of financial portfolio using NGFS scenarios.

24 Pages Posted: 19 Oct 2022

See all articles by Stefano Battiston

Stefano Battiston

University of Zurich - Department Finance; Ca Foscari University of Venice

Irene Monasterolo

Utrecht University

Bas van Ruijven

International Institute for Applied Systems Analysis (IIASA)

Volker Krey

International Institute for Applied Systems Analysis (IIASA)

Date Written: September 19, 2022

Abstract

We propose a mapping from NACE codes of economic activities, into Climate Policy Relevant Sectors (CPRS) and into the variables of the process-based Integrated Assessment Models (IAM) used by the Network for Greening the Financial System (NGFS) to provide its climate scenarios. We discuss the classification of CPRS at the disaggregation level provided by CPRS Granular, which distinguishes across energy technologies (e.g. within transport, motor vehicles powered by combustion vs electric engines). Then, we describe the mapping of NACE 4-digit – CPRS Granular – IAM variables used in the scenarios of the NGFS. CPRS enable users to group the large number of NACE codes into few categories of climate transition risk. At this point, it is possible to identify for each NACE economic activity the most relevant IAM variable to use in the NGFS scenarios. This procedure enables the use of climate scenarios (e.g. NGFS) for climate-related financial disclosure and climate stress testing. The goal of this note, and of the proposed mapping is to support practitioners, financial supervisors, investors and academics in climate transition risk disclosure and climate transition risk assessment, providing a science-based, transparent and operational tool.

Keywords: Climate transition risk, climate finance, CPRS Granular, classification of economic activities, process-based IAM, NGFS scenarios

JEL Classification: Q54, Q43, O11, O16

Suggested Citation

Battiston, Stefano and Monasterolo, Irene and van Ruijven, Bas and Krey, Volker, The NACE – CPRS – IAM mapping: A tool to support climate risk analysis of financial portfolio using NGFS scenarios. (September 19, 2022). Available at SSRN: https://ssrn.com/abstract=4223606 or http://dx.doi.org/10.2139/ssrn.4223606

Stefano Battiston

University of Zurich - Department Finance ( email )

Plattenstrasse 32
Zürich, 8032
Switzerland

Ca Foscari University of Venice ( email )

Cannaregio 873
Venice, 30121
Italy

Irene Monasterolo (Contact Author)

Utrecht University ( email )

Vredenburg 138
Utrecht, 3511 BG
Netherlands

Bas Van Ruijven

International Institute for Applied Systems Analysis (IIASA) ( email )

Schlossplatz 1
Laxenburg, A-2361
Austria

Volker Krey

International Institute for Applied Systems Analysis (IIASA)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
2,297
Abstract Views
6,678
Rank
12,327
PlumX Metrics