Network for Greening the Financial System

The Network for Greening the Financial System (NGFS), established in 2017, is a global coalition of central banks and financial supervisors. Its mission is to enhance the financial system's ability to manage climate change risks and mobilize capital for green investments. Its core output is a set of authoritative "NGFS Climate Scenarios," such as Orderly, Disorderly, and Hot House World. These are not forecasts but plausible future climate pathways with specific quantitative parameters (e.g., carbon prices, GDP impact). Within risk management, NGFS scenarios are a key tool for implementing TCFD recommendations, providing a foundational framework for climate risk stress testing and scenario analysis. While not a formal management system standard like ISO 31000, it is the most widely adopted reference benchmark for financial regulators globally when assessing climate-related financial risks.

Enterprises apply NGFS scenarios through a structured process. Step 1: Scenario Selection and Calibration. Companies select at least two relevant scenarios (e.g., Orderly, Disorderly) based on their industry and geography, calibrating global parameters like carbon prices to local market conditions. Step 2: Risk Transmission Channel Analysis. Identify how transition risks (policy, technology) and physical risks (extreme weather) impact financials. Step 3: Financial Impact Quantification and Strategy Formulation. Model the financial impacts (e.g., increased Expected Credit Loss) and integrate findings into strategic planning. A Taiwanese financial institution used NGFS scenarios to assess its portfolio, finding that high-emission sectors had a significantly higher default risk in a "Disorderly Transition" scenario, leading to a 10% reduction in high-risk exposure after adjusting its credit policies.

Taiwan enterprises face three main challenges. First, data gaps and quality issues, especially the lack of localized physical risk data and supply chain emissions data. The solution is to combine government open data, international data providers, and internal operational data, starting with critical sites. Second, a shortage of interdisciplinary talent combining finance, climate science, and modeling. The remedy is to form a cross-functional task force and partner with external consultants like Winners Consulting to build internal capacity over 6-12 months. Third, limited management awareness and resource allocation. To overcome this, quantify and link climate risk impacts to core financial metrics (e.g., EBITDA, CapEx) to demonstrate financial materiality to the board and secure resources.

Winners Consulting specializes in NGFS for Taiwan enterprises, delivering compliant management systems within 90 days. Free consultation: https://winners.com.tw/contact