Explore this subject further: How are climate scenarios useful?.
Every significant business decision depends on assumptions about the future. A new facility depends on reliable operating conditions. A supply chain investment depends on access to materials and markets. A new product depends on customers continuing to need what it offers.
Climate change may alter those assumptions during the life of an investment.
Global warming projections help leaders understand the range of possible climate futures. They provide a scientific foundation for exploring what could change, but they do not tell a company what will happen at a particular site, to its customers or to its financial performance.
The business question is: Which assumptions behind our decisions could change under different warming futures, and how much flexibility do we have to respond?
Three things leaders need from climate projections
- A credible range of futures. Use established scientific projections to understand how global conditions could change. Select contrasting futures rather than relying on a single expected outcome.
- A connection to the enterprise. Investigate what those futures could mean for the locations, customers, suppliers, assets and capabilities on which your business depends. Global warming levels are a starting point, not a substitute for regional climate projections and observations. Seek national and local projections relevant to your business.
- Timeframes that reach the decisions you can still influence. Choose assessment periods that extend beyond annual budgets to relevant contracts, asset lives, product development cycles and long-term obligations.
The purpose is not to predict one future. It is to test whether important decisions remain sound across different plausible conditions, and to identify what leaders may need to reconsider.
According to the World Meteorological Organization, the global average temperature in 2025 was about 1.43°C above the 1850–1900 average. That is an observation for one year. Long term warming is assessed over longer periods to account for year to year variability. Both provide global context.
AASB S2 requires reporting entities to use climate-related scenario analysis to assess climate resilience. The analysis must include a scenario aligned with the latest international agreement on climate change and a scenario reflecting a higher global warming outcome. Confirm the precise applicable scenario requirements against the current standard before publication.
The objective is not to choose the most likely future. It is to explore how different plausible conditions could affect the business and the decisions leaders make.
A global warming level, an emissions pathway and a socioeconomic scenario are related concepts, but they are not interchangeable. Record which assumptions, sources, time periods and geographical conditions underpin the analysis.
Read the labels before choosing the scenarios
A baseline is the reference period against which a change is measured. A warming level, such as 1.5°C, describes a rise in global average temperature relative to a baseline. An emissions pathway describes how emissions evolve over time under a set of assumptions. Radiative forcing describes a change in the Earth’s energy balance. A climate projection estimates the conditions that could result. A scenario brings assumptions together into a plausible future you can use to test a decision.
The Shared Socioeconomic Pathways, or SSPs, are narratives developed by international research teams about how societies and economies might evolve combined with different levels of future forcing. Different sources answer different business questions.
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| Source | What to use it for |
|---|---|
| IPCC assessments and Australian climate projections from CSIRO and the Bureau of Meteorology | Use the IPCC for the global picture. Use Australian regional projections to investigate relevant conditions at sites and across supply routes. Check whether the dataset has the resolution and variables the decision requires. |
| Network for Greening the Financial System (NGFS) | Explore how different assumptions about policy, technology and the economy could affect costs, markets and financing. Check whether variables are suitable for your sector and geography. |
| International Energy Agency (IEA) | Explore how energy demand, supply and technology could evolve. Challenge assumptions behind energy intensive investments or products. |
| United Nations Environment Programme (UNEP) | Compare global warming implications under current policies and national commitments. Explain the global outlook and assumptions. |
Australian climate projections · NGFS scenarios · IEA World Energy Outlook · UNEP Emissions Gap Report 2026.
Reading the IPCC’s global climate scenarios
Figure SPM.8 shows how temperature, Arctic sea ice, ocean acidity and sea level could change under five illustrative greenhouse gas emissions pathways. The scenarios range from very low emissions (SSP1-1.9), low (SSP1-2.6) and intermediate (SSP2-4.5) to high (SSP3-7.0) and very high emissions (SSP5-8.5). The figure does not assign a probability to each scenario.
Panel (a) — Global temperature
Global average surface temperature change is shown relative to 1850–1900 using 20-year averages. The pathways show how future emissions affect the scale of warming. Global temperature provides context for investigating local heat, rainfall and water availability; regional projections and company operating and asset information are needed for individual sites and supply chains.
Panel (b) — Arctic sea ice
The area of Arctic sea ice in September is measured in millions of square kilometres. Under intermediate and higher emissions scenarios, the Arctic is projected to be practically ice free in September around mid century. This matters directly to businesses with Arctic exposure and illustrates the scale of climate system change.
Panel (c) — Ocean acidity
Falling ocean surface pH means increasing acidity. Businesses connected to fisheries, aquaculture and marine ecosystems may need to investigate effects on species, production and supply. Commercial consequences depend on species, location and other environmental conditions.
Panel (d) — Sea level through this century
Global mean sea level rise is shown relative to 1900. For coastal property, ports and infrastructure, local sea level, land movement, tides, storm surge and coastal protection determine conditions at a particular location. The dashed curve shows a higher outcome involving uncertain ice sheet processes. Scientists have low confidence in projecting these processes, but severe consequences cannot be ruled out.
Panel (e) — Sea level to 2300
The figure extends the low and very high emissions scenarios to 2300; too few simulations were available for robust results for other scenarios that far ahead. This longer view matters for infrastructure, coastal development and assets with long lasting obligations.
What the shaded ranges mean
The shading shows uncertainty within a scenario. In IPCC terminology, “very likely” covers the assessed 5th–95th percentile range and “likely” the 17th–83rd percentile range. Most panels show these ranges for only two scenarios, but uncertainty applies to the others.
Using the figure in business decisions
The IPCC figure illustrates how different emissions pathways produce different global climate outcomes. It does not show the operating conditions or financial consequences for an individual Australian business.
Leaders can use it to frame three investigations:
- Exposure: Which sites, supply routes, customers and assets could be affected by changing heat, rainfall, coastal conditions or other climate variables?
- Duration: Which decisions create commitments that extend into periods when the differences between warming pathways become more significant?
- Enterprise consequences: What could changes in operating conditions mean for reliability, revenue, costs, capital investment, asset lives and future growth?
The next step is to connect global projections with suitable Australian regional information about the enterprise. Different decisions may require different geographical detail, timeframes and climate variables.
The Climate Value Framework brings scientific context together with enterprise evidence to investigate potential financial consequences and the value of different responses.
Projections of global warming by 2100 under pledge based scenarios
UNEP’s Emissions Gap Report 2026 compares warming under four policy and commitment cases. NDCs, or Nationally Determined Contributions, are countries’ climate commitments under the Paris Agreement. Net zero means balancing the greenhouse gas emissions covered by a target with removals from the atmosphere.
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| Case | What it assumes | Highlighted warming figure | Probability |
|---|---|---|---|
| Current policies continuing | National policies already in place continue without additional action to fulfil all commitments. | 2.8°C | 66% chance |
| Unconditional NDCs continuing | Countries deliver national commitments made without conditions, with comparable effort continuing afterwards. | 2.7°C | 66% chance |
| Conditional NDCs continuing | Countries deliver commitments dependent on finance, technology or capacity support. | 2.6°C | 66% chance |
| Conditional NDCs and all net zero pledges | Countries fulfil conditional national commitments and additional net zero pledges. | 2.1°C | 66% chance |
Source: Executive Summary, UNEP Emissions Gap Report 2026. The source figure in the supplied document should be added to the web page once reproduction and asset handling are approved.
What the bars and lines mean
The bold numbers indicate temperatures with an assessed 66% chance of limiting warming to that level under each case’s central emissions estimate. Coloured bars represent the 10th–90th percentile range from climate response uncertainty. Black lines and dots show a broader range combining emissions and climate response uncertainty. The figure does not assign probabilities to governments choosing or delivering a case.
What does this mean for business leaders?
The difference between warming outcomes under current policies and more ambitious commitments illustrates how much depends on future implementation. But the global temperature figures do not tell individual businesses how their operations, markets or financial performance will change.
Consider three fictional Australian businesses:
Harbourstay Property Group — Accommodation and property
For Harbourstay, warming projections are a starting point for investigating heat, coastal conditions, insurance costs and the performance of its properties. Its leaders need to understand which locations and assets may require investment, and whether the cost can be recovered through occupancy, pricing or longer-term asset value.
Leadership question: Which properties could become more costly to operate or maintain during their remaining investment life?
Southern Cross Commercial Finance — Business lending
For Southern Cross, the effects may arise through borrowers and the assets supporting their loans. Its leaders need to investigate how different climate conditions and economic pathways could affect credit quality, collateral values, customer demand and financing costs.
Leadership question: Which parts of our portfolio may be exposed through customers, assets or markets, and what new information would change our lending decisions?
Verdant Grid Technologies — Renewable energy and storage
This fictional Australian scaleup develops battery storage and energy management solutions for commercial customers. Its founder and Managing Director, Maya Chen, sees opportunities in growing demand for energy flexibility and resilience. But warming projections alone cannot establish where demand will grow or whether new investments will be profitable.
Elena Torres, its Chief Technology Officer, is interested in how heat and other operating conditions could affect technology performance and future product requirements.
Leadership question — Maya Chen: Where could changing energy and resilience needs create a commercially attractive opportunity for Verdant Grid?
Leadership question — Elena Torres: Which climate conditions should influence the design and performance requirements of our next generation of products?
The same global projection prompts different investigations for each company. Understanding enterprise value requires information about their particular locations, business models, customers and financial dependencies.
Using the figure in your disclosure work
- Governance. Can the board understand the assumptions behind management’s selected scenarios and uncertainties?
- Strategy. Does analysis consider different levels of policy delivery and implications for the business model and financial outlook?
- Risk management. How do futures inform assessment of material exposures across operations, customers and suppliers?
- Metrics and targets. Are sources, baselines and assessment periods clear, and are dependencies behind targets explained?
A checklist for choosing scenarios and timeframes for your first report
Use these checkboxes to track your own review as you read. Select a box to mark a step complete; select it again to clear it. Selections are temporary and are not saved or submitted.
0 of 3 steps selected
Choose contrasting, credible futures
Select published scenarios that meet applicable disclosure requirements and reflect the conditions relevant to your business. Record why each was selected, its source and version.
Choose timeframes that reach the decisions you can still influence
Consider annual budgets, contract renewals, asset replacement, product development, infrastructure lifetimes and longer-term obligations. Specify the years and explain their relevance.
Identify the information needed to connect projections with enterprise value
Global temperature outcomes cannot establish site-level exposure, customer behaviour or financial consequences. Identify which regional projections, company records and commercial assumptions need investigation.
For your next leadership discussion, select one significant investment, operating or strategic decision. Ask which assumptions might change under different futures, what information is available, and which choices could preserve flexibility.
You do not need certainty about the future to begin. You need a defensible set of assumptions, a clear account of uncertainty and an understanding of which decisions remain within your influence.
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