NGFS Short-Term Climate Scenario Stress Test (2025-2030)

The NGFS short-term scenarios (May 2025) are the first tool to assess near-term climate risk for the financial system and economy. They model four plausible pathways:

Highway to Paris: Orderly, globally coordinated green transition with ambitious policies.
Sudden Wake-Up Call: Abrupt, disorderly policy shift after delay, causing higher costs.
Disasters and Policy Stagnation: Severe regional extreme weather events, no new policy.
Diverging Realities: Mixed: some regions act, others face disasters and supply chain shocks.

All figures below are actual published NGFS results.

Highway to Paris: Orderly transition, limited global GDP loss (-0.5% in 2030).
Sudden Wake-Up Call: Disorderly transition, sharper GDP loss (-1.3% in 2030).
Disasters and Policy Stagnation: Extreme weather, temporary but material GDP drops (up to -2.1% globally in 2027 after a disaster in Asia, -1.0% in 2026 after a disaster in Europe).
Diverging Realities: Compounding shocks and supply chain disruption; lasting global GDP losses up to -2.8% in 2028.

Source: NGFS Short-Term Scenarios, May 2025^[4][6]

Orderly transition (Highway to Paris) leads to a small unemployment rise (+0.7pp in 2030).
Disorderly transition (Sudden Wake-Up Call) and compounding shocks (Diverging Realities) cause larger increases (+1.3pp to +1.7pp).
Physical risk scenarios cause temporary spikes, especially in affected regions.

Source: NGFS Short-Term Scenarios, May 2025^[4][6]

Each scenario is a plausible, NGFS-modeled pathway for the next five years. The charts show the actual projected impact on global GDP and unemployment, as published by NGFS. These scenarios help financial institutions and policymakers stress test portfolios and plan for climate risk.
All data is from NGFS (May 2025).

Data: NGFS Short-Term Scenarios (May 2025), Main Takeaways and Technical Documentation.
For more: NGFS official site

Scenario and Stress Testing for Sustainable Finance Dashboard

The Network for Greening the Financial System (NGFS) short-term climate scenarios, published in May 2025, provide a pioneering framework to assess the near-term risks that climate change and policy responses pose to the global economy and financial system. These scenarios model plausible pathways over the next five years (2025-2030), capturing a range of transition and physical risk outcomes. Understanding these scenarios helps financial institutions, regulators, and policymakers anticipate potential economic impacts and stress test portfolios accordingly.

Four Scenarios

Highway to Paris: An orderly, globally coordinated transition to net zero, with ambitious climate policies implemented early, minimizing economic disruption.
Sudden Wake-Up Call: A delayed and disorderly transition, where abrupt policy changes cause higher economic costs and market volatility.
Disasters & Policy Stagnation: Characterized by severe extreme weather events and insufficient climate policies, leading to significant physical damages and economic shocks.
Diverging Realities: A mixed scenario where some regions advance climate action while others face disasters and supply chain disruptions, resulting in compounded economic challenges.

Global GDP Loss by Scenario

This chart shows the projected peak global GDP losses relative to a baseline scenario without additional climate action or shocks. The losses reflect the combined effects of transition costs and physical climate damages under each scenario:

The Highway to Paris scenario results in the smallest GDP loss (around −0.5% by 2030), reflecting a smooth transition with limited economic disruption.
The Sudden Wake-Up Call scenario leads to a sharper GDP decline (−1.3%), as late and abrupt policy shifts increase costs.
The Disasters & Policy Stagnation scenario shows more severe losses (up to −2.1%) due to extreme weather events causing direct economic damage.
The Diverging Realities scenario results in the largest GDP loss (−2.8%), driven by a combination of physical shocks and fragmented policy responses.

Global Unemployment Increase by Scenario

Climate-related economic disruptions also affect labor markets. This chart illustrates the projected peak increase in global unemployment rates (in percentage points) under each scenario:

The Highway to Paris scenario causes a modest unemployment increase (+0.7 percentage points), consistent with a managed transition.
More disorderly or shock-heavy scenarios like Sudden Wake-Up Call and Diverging Realities see higher unemployment rises (+1.3 to +1.7 percentage points), reflecting greater economic stress.
Physical risk scenarios cause temporary spikes in unemployment, particularly in regions directly affected by disasters.