Appendix 1 – Climate scenarios
Effective carbon price 2050 (per tonne) 2
Assumed temperature rise 1 by 2100
Physical risk
Transition risk
Scenario
Brief description
The scenario does not seek to price in any physical or transition climate effects. The calibration of this scenario is aligned to Moody’s Best Views (Real World) calibration, which is based on current market data and historic trends. Additional policy implementation is delayed until 2030. Stronger policies are then required (versus a scenario whereby policy implementation is not delayed), in order to limit global temperature rises to below 2.0 o c. No new climate policies are introduced beyond those currently in place, resulting in a growing concentration of greenhouse gas emissions and a larger increase in global temperatures, relative to a transition scenario. Additional policy implementation is delayed and diverges globally. Those countries with net-zero targets are assumed to meet c.80% of their target, whilst those without follow current policies. This scenario has been created by Barnett Waddingham and takes the highest negative return impact, on an annual basis, across the other three scenarios. The scenario is assumed to exhibit a mixture of characteristics from the above scenarios (i.e. delayed transition and high temperature rises).
Base case (for CRI scoring)
--
--
None
None
Delayed transition
o
$500
Limited
High
<2.0
c
Current policies
o
<$50
High
Limited
3.0
c
Fragmented world
o
<$100
Medium
Medium
2.5
c
Late and inadequate action 3
o
$500
High
3.0
c
All figures are approximate. 1 Relative to pre-industrial levels. 2
Effective carbon price essentially bakes transition risk into one price. In reality, transition risk impacts would be felt wider than just through carbon pricing. Therefore, carbon pricing may be expected to be lower. This one price method aims to simplify the risk exposures. As at April 2025, carbon pricing in the largest markets was in the region of $60-80. 3 Whilst the ‘late and inadequate action’ scenario does not explicitly split out physical and transition risks, nor does it have specific assumptions around temperature rise and / or carbon pricing, it is assumed that the scenario denotes a combined level of temperature rise and effective carbon pricing that are both high and, therefore, physical and transition risks that are high.
UTC UK Pension Scheme | TCFD Report | 31 December 2025
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