New climate scenarios for a holistic view of climate change impacts

These kinds of disruptions and fundamental shifts have the potential to completely change the structure of the global economy. Theories of sustainability transitions provide us with the analytical lenses needed to make sense of these changes: to understand what entirely new sectors, systems and economies might look like, and how new technologies, business models and cultural understandings come together. Most quantitative models struggle to capture this non-linear, varied picture. In short, they make assumptions which may not be true within a fundamentally different economy. However, qualitative scenarios allow us to open up and interrogate these assumptions.

This need was at the core of an open call by the investment firm Baillie Gifford, who are required to engage with a series of quantitative scenarios created by the Network for the Greening of the Financial System (NGFS), a group of key central banks. Baillie Gifford sought to add greater complexity to these scenarios through the development of more comprehensive, system-wide qualitative narratives. Deep Transitions responded with an approach grounded in evidence-based understandings of sustainability transitions, and the Climate Scenarios Expansion Project was launched. In particular, the project took aim at a series of important factors including:

• A more holistic view of climate solutions, including not only technologies and other tangible innovations, but also intangible behavioural changes, cultural shifts, and institutional innovations.
• Greater engagement with physical risk, including risk transmission channels and potential correlations. Additionally, hard-to-quantify risks such as migration, conflict, and non-linear or discontinuous environmental changes (tipping points) were listed as specific issues left unaddressed by NGFS.

‍

The climate and energy transitions will be hugely complex

“The climate and energy transitions will be hugely complex and may bring about entirely new opportunities and behaviours. In trying to imagine different ways the future could play out, we wanted to be challenged by new ideas and new ways of thinking. The Deep Transitions team brought a depth of historical understanding and a range of experts from many disciplines to the task. This first iteration has been fascinating, and we are excited about how it can develop from here.”

– Caroline Cook, Head of Climate Change, Baillie Gifford

Setting out the DT approach

The Deep Transitions team set out an approach which first sought to deconstruct and then reconstruct three original NGFS scenarios from a Deep Transitions theory-consistent perspective. With our interdisciplinary team, we were able to incorporate expertise from many fields. We combined global-level risk mapping with in-depth research into particular focal geographies. We produced three scenarios which better represented the complexity and unpredictability of these issues.

‍

Our goal was to present this work not only in the form of technical (theoretical) summaries, but also as compelling, character-based narratives. We wanted to ground the reader’s understanding of these expanded scenarios not just in facts and figures, but on a deeper, more experiential level. The vignettes helped to ground the technical work by illustrating what the potential future might look like in a specific locale from an individual or community perspective. This exploration also meant that we could consider possible pathways of hope – transition dynamics that might lead each possible future to a better world. Identifying potential transition pathways opens up the possibility of investment portfolio design that could identify systemic leverage points to create positive change. Finally, we compiled the technical summaries and narrative vignettes into a set of resources, testing these in a live workshop with members of Baillie Gifford’s team.

‍

Taking a systemic perspective revealed key limitations

“Reflecting on this work, on the differences between our theory-consistent scenarios and those of NGFS, and on the utility of the workshop exercises, we found that taking a systemic perspective revealed key limitations, blind spots, and inconsistencies in the construction of the original NGFS scenarios. Our work demonstrated that a theory-consistent approach to scenario construction leads to fundamentally distinct outcomes and implications when imagining potential futures – a troubling fact for financial sector stakeholders with a responsibility to test their portfolios against the NGFS scenarios.”

– Jack Davies, PHD candidate, Deep Transitions Lab

‍

An opportunity to become world builders

Failing to engage with a systemic, holistic and theory-consistent approach could mean that companies and investors are exposing themselves to unforeseen risks. The original NGFS scenarios don't (from a transitions perspective) enable companies to understand if they are prepared for nonlinear disruption, resilient to the full spectrum of risks they will face, or adequately future-proofed against coming changes. This is not only a question of risk: a more empowering and exciting query rests around systems change. At a portfolio level, are companies contributing towards true systems change? The opportunity here is for investors to become world builders: to imagine what a just and sustainable future could look like and to lay the groundwork towards that. 

‍Download the full project report or learn about what we do at the Deep Transitions Lab.

‍

‍