which scenarios are examples of physical changes

These data providers collect production capacity, forecasts, and investment data at the most granular level, including barrels of oil by field, cars by model and factory, new capacity by power plant. Projected production (for Fossil Fuels and Automotive) and new capacity (for Utilities) for the next 5 years was sourced from commercial business intelligence databases. The analysis, based on the IEA scenarios, is applied to the California Department of Insurance and covers fossil fuel extraction (oil, gas, and coal mining) production of electricity (from coal, gas, hydro, nuclear, and renewables) and, the production of cars (internal combustion engines - gasoline and diesel, hybrid, and electric). The SDS (also referred as “2° scenario”), B2DS (“1.75☌ scenario”), NPS (“2.7☌ scenario”), and CPS (“3.2☌ scenario”) all provide forward-looking projections with enough regional detail to perform scenario analysis for 11 technologies in 3 sectors. Additionally included in this analysis are the Beyond 2° Scenario (B2DS), New Policies Scenario (NPS) and Current Policies Scenario (CPS): other technology roadmaps that correspond to a 50% probability of maximum 1.75☌, 2.7☌, and 3.2☌ warming, respectively. This analysis is based off the Sustainable Development Scenario (SDS) which corresponds to limiting temperature increase to 2☌ or 3.6☏ by 2100. They define how climate-relevant technologies - essentially energy technologies - must be deployed by 2050 to reach a 50% probability of limiting warming to different temperature ranges. The scenarios from the International Energy Agency (IEA) have been used throughout this analysis. This analysis is based on the composition of the insurers’ portfolios at the end of year 2017 assuming no change in portfolio composition. Data on insurers’ investments was taken from the 2017 year-end financial filings of all insurers operating in California with more than $100 million premiums, yielding a sample of over $4 trillion in investments, the bulk of which is held in fixed-income portfolios. See the ‘Important Considerations and Limitations’ section at the end of this page for notes on interpreting these scenarios. To ensure comparability across results, this analysis uses the ‘Energy Technology roadmaps’ published by the International Energy Agency (IEA). This analysis compares the currently planned production from physical assets allocated to a portfolio (for example, the projected number of barrels of oil produced by an oil well owned by a company that has issued a security held in an insurer’s portfolio) with future production levels defined in a 2☌ scenario. The goal of the scenario analysis was to assess California insurers’ exposure to transition risk, individually and as a whole, based on the evolution of production and assets in the real economy. As part of its supervisory role, the California Department of Insurance engaged the 2° Investing Initiative (2Dii) to undertake a scenario analysis of the investment portfolios of insurance companies operating in California with more than $100 million in premiums. Physical risks are the weather-related impacts exacerbated by climate change.

Transition risks are risks generated by the policy, technology, market, and regulatory changes likely to accompany the transition to a low carbon economy. The TCFD grouped climate-related risks into two categories: transition and physical risks.

In June 2017, the FSB Task Force on Climate-related Financial Disclosures (TCFD) recommended that financial institutions perform scenario analysis on their portfolios to assess financial risks related to climate change. SCENARIO ANALYSIS: Assessing Climate Change Transition Risk in Insurer Portfoliosīackground.

Which scenarios are examples of physical changes