The missing middle: the most likely climate scenario

About this episode

Most institutional climate analysis starts from one of two scenarios: a 1.5°C world of rapid decarbonization, or a 4°C hot-house world. Regulators ask for them, and they fill most stress tests. They are also the two least likely outcomes.

This episode covers new research from Dr Ben McNeil into which future the world is actually tracking.

What you’ll hear

The research runs the observed emissions record forward thousands of times and measures which of 19 standard IPCC, NGFS and Inevitable Policy Response scenarios each path most resembles. Scenarios are compared on cumulative carbon, the quantity that drives warming.

The 1.5°C and rising-emissions extremes together hold less than 0.2% of the probability. A single scenario of patchy, partial climate policy carries more than 70%.

The episode also covers what this means for a portfolio. Under a 1.5°C pathway, every company in the sample shows maximum transition risk, so nothing separates them. Under the world being tracked, utilities and airlines fall to low single digits or low tens of percent. A coal-heavy utility stays at the maximum, so structural risk still shows up.

The message for investors is to report against the tails, but invest against the expected world.

Read the full research

The white paper sets out the full probability distribution and the warming it implies.

Read the white paper