Discussion paper on conducting advanced scenario analysis

This document is a discussion paper that outlines approaches to advanced scenario analysis. It builds on the TNFD’s foundational guidance on scenario analysis. It is primarily intended for experienced users of scenarios in financial institutions and large multinational companies interested in advanced nature scenario methods. This may include those taking action in anticipation of regulatory stress testing, as has occurred with climate-related risk assessment.

Key focus areas

• A comprehensive overview of three phases of scenario development, tailored for advanced assessments
• Practical step-by-step outline of the implementation of each phase
• Examples of scenario development and application for different use cases using the IPR FPS + Nature approach as an illustration
• Overview of recommendations and guidance on nature-related scenario in frameworks and standards

Key outcomes

• Stimulate feedback to the TNFD on the development of guidance on advanced scenarios.
• Enable financial institutions and large corporates to use advanced scenarios to explore implications of uncertainties, assess risks, set targets and transition plans and test the resilience of their strategies.
• Support action by financial institutions in anticipation of regulatory stress testing on nature-related risks, as has occurred with climate-related risk assessment.