Question to the HM Treasury:

To ask His Majesty's Government, further to the answer by Baroness Vere of Norbiton on 25 January (HL Deb col 843), what assessment the Bank of England has made of the accuracy of the new Low Demand scenario and Fragmented world scenario published by the Network for Greening the Financial System, and whether these satisfactorily address what Baroness Vere of Norbiton referred to as "the challenges of the model ... [including the fact that] there is a higher number of independent transmission channels than previously thought and a lack of historical data", and the need to "anticipate a firm's reaction to climate change over the longer term".

HM Treasury and the Bank of England welcome work by the NGFS to evolve and improve their climate scenarios. The NGFS scenarios have been designed in collaboration with an expert group of climate scientists and economists and are widely recognised throughout the global community. However, while the scenarios provide a useful starting point for considering how climate risks could evolve under a set of plausible outcomes, they should not be treated as forecasts, and despite significant progress in modelling capabilities, do not account for every potential implication of climate change.

The Bank of England worked with the NGFS to publish a guidance note in January 2024, which sets out how users should apply and adapt the scenarios within their work, including caveats to be mindful of, and where they may wish to tailor the intensity of the scenarios.

The Bank continues to support the development of climate scenarios as a member of the NGFS’ dedicated “Scenario Design and Analysis” Workstream. The NGFS have strived to address many of the difficulties associated with climate modelling to date and continue to make further improvements with each iteration (for example, the latest Phase IV incorporated the impacts of additional physical hazards) in line with improving scientific understanding and computational capabilities, to ensure the scenarios continue to provide an important public good for public and private stakeholders.