Net Zero 2050
Climate policies tighten early and steadily, reaching net zero around 2050. Carbon costs rise soon, but predictably, giving counterparties time to adjust.
early · gradual
Transition risk
What the move to net zero costs each counterparty, in your currency.
Four NGFS scenarios, Net Zero 2050, Delayed Transition, Current Policies and NDCs, translated into carbon cost, revenue and credit impact for every counterparty in your book, and reported in your organisation’s own currency.
Portfolio carbon cost, 2050
R 1.42 bn per year
range R 1.08–1.81 bn
PD uplift +29 bps
PD uplift +29 bps
| Counterparty | Carbon cost | Revenue | PD Δ | Band |
|---|---|---|---|---|
| Cement producer | R 520 m | −6.8% | +41 | Stressed |
| Coal-fired IPP | R 610 m | −11.2% | +88 | Stranded |
| Fertiliser plant | R 164 m | −3.1% | +19 | At risk |
| Retail REIT | R 22 m | −0.4% | +2 | Low |
srcNGFS · Delayed TransitionccyZARIllustrative
Four NGFS scenarios
Four futures for policy, priced side by side.
The Network for Greening the Financial System scenarios are the reference supervisors use. We carry four of them, so the same counterparty can be read under an orderly, a disorderly and a hot-house world without changing tools.
Delayed Transition
Little changes until 2030, then policy has to move fast. The late, sharp jump in carbon cost is where credit impact tends to be largest.
late · abrupt
Current Policies
Only the policies already in place are kept. Transition costs stay low, and physical risk carries the weight instead.
low transition · high physical
NDCs
Countries deliver the Nationally Determined Contributions they have pledged, including those of the African countries where your counterparties operate.
pledged policy
Carbon cost, revenue, credit
From a carbon price to a probability of default, per counterparty.
A scenario is only useful when it reaches the line your committee approves. Transition risk follows each counterparty through three measures.
- 01 · Carbon costWhat emissions will costAnnual carbon cost under each scenario and horizon
- 02 · RevenueWhat demand will doChange in revenue as markets and prices shift
- 03 · CreditWhat it does to the loanPD uplift and expected credit loss, ready for stress testing
Annual carbon cost, cement producer, by scenario
R 520 m · Delayed, 2050
2030 vs 2050
ZAR m per year
ZAR m per year
srcNGFS · 4 scenariosccyZARIllustrative
Two dimensions, never one
Physical and transition risk are different problems. We keep them apart.
Blending them into a single score hides what to do about either. A maize cooperative exposed to drought needs a different conversation from a cement producer exposed to a carbon price.
- Every counterparty carries a physical and a transition reading, shown on separate axes.
- They meet only in stress testing, where you choose how to combine a physical shock with a transition scenario.
- Each figure keeps its own source: CMIP6 for the physical side, NGFS for the transition side.
Corporate book, physical against transition, 2030
9 counterparties
SSP2-4.5 × Delayed Transition
score 0–100
score 0–100
xphysical · CMIP6ytransition · NGFSIllustrative
Figures in your currency
Rand in Johannesburg, shillings in Nairobi, naira in Lagos.
Each organisation sets its reporting currency once. Carbon cost, revenue impact and expected credit loss are then shown in it everywhere: the console, the scenario report, the Parquet files and the API.
| Organisation | Currency | Carbon cost | Revenue impact | PD Δ |
|---|---|---|---|---|
| Bank reporting in rand | ZAR | R 164 m | −3.1% | +19 bps |
| Bank reporting in shillings | KES | KSh 1.17 bn | −3.1% | +19 bps |
| Bank reporting in naira | NGN | ₦ 14.3 bn | −3.1% | +19 bps |
What you can do with it
Questions a credit or sustainability team brings to the table.
Transition risk answers the policy-side questions, one counterparty at a time, and adds them up for the book.
Which counterparties’ PD rises most under a Delayed Transition?
Rank the book by PD uplift and see the carbon cost and revenue change behind each one.
PD Δ · Delayed TransitionHow much would carbon cost our heavy-industry clients in 2030 under Net Zero 2050?
Sum annual carbon cost by sector, in your reporting currency, with a range.
carbon cost · sector · ZARWhere is a counterparty exposed on both dimensions at once?
Plot physical against transition risk and pick out the corner where both are high.
physical × transitionWhat does our supervisor’s NGFS exercise look like on our own book?
Run all four scenarios side by side and carry the credit impact into a stress test and its report.
4 NGFS · stress testing · report
See it on your own book
Bring a sample portfolio. Leave with a stress result.
In a working session we run a sample of your counterparties through a physical shock and a transition scenario, and walk you through every step of the chain from hazard to capital.