Choosing the Right RCP Scenario: Strategic Guide for Climate-Resilient Business Planning in 2025

Executive Summary

Selecting appropriate climate scenarios is no longer a technical exercise—it's a strategic imperative that shapes your company's resilience and competitive advantage. As of 2025, the landscape has fundamentally shifted: the Intergovernmental Panel on Climate Change (IPCC) now combines Representative Concentration Pathways (RCPs) with Shared Socioeconomic Pathways (SSPs), the Task Force on Climate-related Financial Disclosures (TCFD) has been replaced by ISSB standards, and the Corporate Sustainability Reporting Directive (CSRD) is actively enforced across the EU. This guide shows you how to navigate these changes whilst building climate-resilient strategies that create value, not just compliance.

The world has already reached approximately 1.1°C to 1.2°C of warming above pre-industrial levels, with the 1.5°C threshold expected to be breached in the early 2030s under almost all scenarios. For businesses, this means climate scenario planning must account for both physical risks from extreme weather and transition risks from rapid policy and technology shifts. Global investment in clean energy now stands at approximately £1.6 trillion—nearly double that of fossil fuels—creating unprecedented opportunities alongside the challenges.

The Evolution from RCP to SSP-RCP Scenarios: What Changed and Why It Matters

Understanding the Fundamental Shift in Climate Modelling

The IPCC Fifth Assessment Report introduced Representative Concentration Pathways as a framework for understanding future greenhouse gas emissions and their impacts on radiative forcing. However, the IPCC Sixth Assessment Report marked a critical evolution by integrating SSPs with RCPs, creating combined scenarios like SSP1-2.6 or SSP5-8.5. This shift wasn't merely academic—it fundamentally changes how businesses should approach climate change scenarios.

RCPs alone focused on emissions pathways and greenhouse gas concentrations, modelling how much radiative forcing the atmosphere would experience under different trajectories. SSPs add the crucial socio-economic context: population growth, technological advancements, economic development, regional conflicts, and the degree to which societies increasingly focus on sustainable development. This combination allows for far more nuanced assessment of both physical risks and transition risks.

For strategic planning, this means you can now evaluate not just whether global warming reaches 2°C or 3°C, but also what kind of world produces that outcome. A high-emissions scenario driven by competitive markets and rapid technological progress (SSP5-8.5) creates different business risks and opportunities than one driven by regional conflicts that push countries toward more sustainable paths through necessity (SSP3-7.0).

The New Scenario Framework for Business Planning

Climate change research now centres on integrated assessment models that combine emissions scenarios with socio-economic factors. The Panel on Climate Change has defined five primary SSPs, each representing fundamentally different futures:

SSP1 – Sustainability ("The Green Road"): This scenario assumes the world shifts gradually toward more sustainable practices that respect perceived environmental boundaries. High human capital investment, participatory societies, and increasingly integrated global markets characterise this pathway. When combined with RCP 2.6, it represents the most optimistic scenario where climate policies produce rapid technological progress in renewable energy whilst population growth moderates and environmental concerns drive decision-making.

SSP2 – Middle of the Road: Historical trends continue in this scenario. Some progress toward sustainability goals occurs, but slowly. Social, economic, and technological trends don't shift markedly. When paired with RCP 4.5, this represents a realistic baseline where climate change mitigation efforts succeed partially but face persistent challenges from competing priorities.

SSP3 – Regional Rivalry ("A Rocky Road"): Regional conflicts push countries toward more inclusive development within their borders whilst global cooperation weakens. Nationalism and regional security concerns dominate. Economic development is slow, population growth high in developing countries, and technological change uneven. Combined with RCP 7.0, this scenario increasingly represents a plausible high-risk baseline, potentially more realistic than SSP5-8.5.

SSP4 – Inequality: This pathway features highly unequal investments in human capital combined with increasingly divided societies. Political power concentrates in relatively small elite groups whilst broader development stagnates. The world places increasing faith in competitive markets but with vastly different outcomes for different populations.

SSP5 – Fossil-Fuelled Development: This scenario assumes rapid technological progress, economic growth, and exploitation of abundant fossil fuels drive development. Global markets become increasingly integrated, human capital investment is high, but environmental boundaries receive minimal consideration. When combined with RCP 8.5, it produces the highest emissions and most severe physical climate impacts.

Why Both Dimensions Matter for Your Strategy

Using the combined SSP-RCP framework enables you to stress-test your business model against fundamentally different futures. Consider a renewable energy company: under SSP1-2.6, strong climate policies and sustainable development create massive market opportunities but also fierce competition. Under SSP3-7.0, fragmented global markets and regional conflicts might reduce overall demand whilst creating protected national markets. The transition risks, physical risks, and strategic opportunities differ dramatically.

For CSRD climate risk reporting, regulators expect you to demonstrate how your strategy remains resilient across multiple plausible futures—not just optimistic ones. The IPCC Fifth Assessment Report provided the foundation, but the assessment report's latest iteration demands more sophisticated scenario analysis that accounts for the full spectrum of climate change scenarios.

Regulatory Landscape 2025: From TCFD to ISSB and Active CSRD Implementation

The TCFD Transition to IFRS Sustainability Standards

A critical update for 2025: the Task Force on Climate-related Financial Disclosures was officially disbanded in October 2023. Its work has been consolidated under the IFRS Foundation through two new standards: IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures). These standards represent the new global baseline for climate disclosure, fully incorporating TCFD recommendations whilst adding greater rigour and specificity.

The transition from TCFD to ISSB isn't merely rebranding—it represents a shift from voluntary guidance to mandatory baseline standards in many jurisdictions. IFRS S2 explicitly requires scenario analysis using at least one scenario aligned with limiting global warming to 1.5°C, alongside scenarios relevant to your specific circumstances. This means companies can no longer treat climate scenario planning as optional or purely qualitative.

For businesses operating across multiple jurisdictions, the ISSB standards provide welcome harmonisation. Rather than navigating dozens of different disclosure frameworks, you now have a single global baseline that interoperates with regional requirements like the EU's ESRS (European Sustainability Reporting Standards) under CSRD.

CSRD: Now Live and Actively Enforced

The Corporate Sustainability Reporting Directive moved from "upcoming requirement" to active reality in 2025. First reports are now due covering FY2024 data for companies previously subject to the Non-Financial Reporting Directive (NFRD). The phased rollout continues with Wave 2 (large non-listed companies) and Wave 3 (listed SMEs) in subsequent years, though legislative proposals to delay these by up to two years remain under discussion.

CSRD's double materiality approach requires you to assess both how climate change impacts your business (financial materiality) and how your business impacts the climate (impact materiality). For scenario analysis, this means evaluating risks across multiple RCP scenarios or SSP-RCP combinations to demonstrate resilience whilst also showing how your strategy aligns with climate transition pathways.

The directive's prescriptive nature means vague statements about "considering climate risks" no longer suffice. You must disclose specific scenarios used, time horizons assessed, key assumptions, potential impacts quantified where possible, and how scenario insights inform strategy. Companies struggling to meet these requirements should explore professional sustainability consulting to ensure compliance whilst building genuine strategic value.

Integration with EU Taxonomy and Other Frameworks

Climate scenario analysis doesn't exist in isolation. Your scenario work must align with EU Taxonomy screening criteria, which themselves reference specific emission trajectories and climate pathways. Similarly, if you're seeking sustainable finance or positioning for Article 8/9 fund classifications, your scenario analysis must demonstrate credible transition planning consistent with Paris Agreement goals.

This integration creates both challenges and opportunities. The challenge: multiple reporting requirements with overlapping but not identical scenario requirements. The opportunity: conducting robust scenario analysis once enables you to satisfy multiple frameworks simultaneously whilst generating genuine strategic insights. Think of it as building climate risk integration into your core planning processes rather than bolting it on for compliance.

Physical vs Transition Risks: Strategic Implications Across Scenarios

Mapping Risk Types to Scenario Choices

Different climate scenarios emphasise different risk categories. Understanding this relationship is crucial for strategic scenario selection and effective risk management.

Physical Risks under High-Emission Scenarios: Under SSP5-8.5, greenhouse gas emissions continue rising throughout the 21st century, with CO₂ concentrations potentially reaching 2,000 ppm—nearly seven times pre-industrial levels. This pathway produces severe physical risks: more frequent and intense extreme weather events, rising sea levels (potentially 0.98 metres by 2100 compared to 0.29 metres under SSP1-2.6), shifting agricultural zones, and chronic stresses from temperature changes affecting operations, supply chains, and customer demand.

Swiss Re's 2024 analysis highlights current economic exposure: the Philippines faces approximately 3% of GDP in weather-related losses today, whilst the US faces 0.4%. Under severe scenarios approaching 3°C of global temperature rise by mid-century, global economic value losses could reach 10-18% depending on adaptation measures. For businesses with long-lived assets, geographically concentrated operations, or climate-sensitive supply chains, high-emission scenarios demand serious physical risk planning.

Transition Risks under Low-Emission Scenarios: Paradoxically, scenarios limiting global warming to 1.5°C or 2°C create the most intense transition risks. Achieving SSP1-2.6 requires peak emissions by 2020 (already passed), rapid decline through 2050, and net-zero or net-negative emissions thereafter. This demands revolutionary changes: carbon pricing potentially exceeding €200/tonne, phase-out of unabated fossil fuels, massive renewable energy deployment, and transformation of energy-intensive industries.

For companies in carbon-intensive sectors, transition scenarios create strategic crossroads. Early movers can capture opportunities in clean technology markets—global clean energy investment reached approximately £1.6 trillion in 2024, double fossil fuel investment. Late movers face stranded assets, regulatory penalties, and competitive disadvantage. The International Energy Agency projects solar PV investment alone now exceeds all other generation technologies combined, reshaping entire value chains.

Industry-Specific Scenario Implications

Different sectors face wildly different risk profiles across climate scenarios:

Manufacturing and Industry: Under SSP1-2.6 or SSP2-4.5, your primary challenges involve transitioning to low-carbon processes whilst navigating carbon border adjustments and evolving efficiency standards. Supply chain resilience matters, but transition planning dominates. Under SSP5-8.5, physical risks to production facilities, logistics networks, and raw material availability become paramount. The Energy Intensity of your operations determines vulnerability—high-intensity manufacturers face both higher carbon costs under transition scenarios and greater physical exposure under high-emission pathways.

Financial Services and Insurance: Climate scenarios directly impact portfolio valuation, underwriting models, and investment strategies. Transition scenarios create winners and losers across your holdings—companies with credible decarbonisation plans gain value; those without face growing discount rates. Physical scenarios force recalibration of catastrophe models and geographic risk assessments. The insurance industry must distinguish acute physical risks (extreme events) from chronic shifts (sea level rise, temperature changes) across different time horizons, with scenario selection determining whether minor model adjustments suffice or fundamental recalculation becomes necessary.

Agriculture and Food Systems: Few sectors face such profound impacts across all scenarios. SSP1-2.6 brings policy pressure for sustainable farming practices whilst potentially stabilising growing conditions long-term. SSP5-8.5 fundamentally reshapes where crops can grow, water availability, pest pressures, and yield stability. Methane emissions from livestock face increasing scrutiny under transition scenarios. Regional differences matter enormously—what constitutes a plausible scenario for European agriculture may be entirely different for Southeast Asian rice production.

Technology and Digital Services: The tech sector faces a unique duality. Under transition scenarios, demand for climate solutions—from renewable energy optimisation to carbon accounting platforms—explodes. Simultaneously, data centre energy consumption creates carbon liabilities. The narrative has shifted from pure opportunity to needing credible plans for powering AI and computing infrastructure with clean energy. High-emission scenarios potentially impact physical infrastructure (cooling requirements, extreme weather resilience) whilst also increasing demand for adaptation technologies.

Step-by-Step Framework for Scenario Selection and Analysis

Define Your Strategic Time Horizons and Planning Needs

Effective scenario selection begins with clarity about what decisions you're trying to inform. Different planning horizons demand different scenario approaches:

Short-term (2025-2030): Differences between scenarios remain relatively modest over this period, as the climate system responds slowly to emission changes. Your focus should be on policies already enacted or highly likely, near-term physical risks at your current locations, and positioning for the transition already underway. Operational measures dominate: implementing internal carbon pricing, securing renewable energy contracts, and beginning supply chain adaptation.

Medium-term (2030-2050): Scenario divergence becomes meaningful. By mid-century, the difference between aggressive mitigation (SSP1-2.6) and continued high emissions (SSP5-8.5) approaches 1°C of additional warming—enough to fundamentally alter business conditions. Strategic decisions about facility locations, major capital investments, technology platform choices, and market positioning require genuine scenario analysis. This is where understanding RCPs and SSPs becomes strategically critical rather than academically interesting.

Long-term (post-2050): Scenarios diverge dramatically. Infrastructure projects, pension funds, and industries with multi-generational time horizons must grapple with uncertainty ranging from a stabilised 1.5-2°C world to potentially 3-4°C of warming with ongoing emissions. At these time scales, using multiple scenarios isn't optional—it's the only way to stress-test strategy against genuinely different futures.

Assess Your Exposure Profile: Physical, Transition, and Systemic Risks

Your scenario selection should reflect where your business is genuinely vulnerable:

Physical Risk Exposure Assessment: Evaluate geographic concentration of assets and operations, supply chain dependencies on climate-sensitive regions or processes, customer base exposure to climate impacts, and resilience of physical infrastructure. Companies with dispersed global operations, multiple sourcing options, and flexible manufacturing may prioritise transition scenarios. Those with concentrated facilities in vulnerable locations—coastal areas, water-stressed regions, extreme heat zones—must seriously model high-emission physical risk scenarios.

Transition Risk Exposure Assessment: Consider carbon intensity of current business model, regulatory exposure (EU ETS, carbon border adjustments, product efficiency standards), technology disruption risk, and customer/investor pressure for sustainability. Carbon-intensive manufacturers, fossil fuel adjacent industries, and companies in regulated sectors face asymmetric transition risks—getting this wrong creates existential threats, getting it right creates competitive advantages.

Systemic and Cascade Risk Consideration: Beyond direct impacts, consider second and third-order effects. Financial institutions face risks from customers who themselves face climate risks. Technology companies depend on electricity grids and cooling water. Retailers rely on consumer purchasing power potentially undermined by climate impacts. These hidden supply chain climate risks often prove more material than direct exposure.

Select Your Scenario Portfolio: The Multi-Scenario Imperative

ISSB standards, CSRD requirements, and best practice all point toward using multiple scenarios. A typical robust portfolio includes:

A Paris-Aligned Scenario (SSP1-2.6 or SSP1-1.9): This tests your strategy against the world successfully limiting warming to 1.5-2°C. It represents maximum transition risk, moderate physical risk. Use this to evaluate: viability of current business model under aggressive climate policy, opportunities in clean technology and sustainable products, stranded asset risk, and regulatory compliance trajectory. For many companies, this scenario should drive strategic planning because it represents stated policy goals and investment trends.

A Middle-Ground Scenario (SSP2-4.5): This reflects delayed but ultimately meaningful climate action. Moderate transition risks emerge alongside increasing physical impacts. It's often the most "realistic" scenario based on current policy trajectories and technological trends. Use this for baseline planning, testing resilience to partial climate action, and evaluating options that work across a broad range of outcomes.

A High-Impact Physical Risk Scenario (SSP3-7.0 or SSP5-8.5): This tests resilience to severe physical climate impacts. Note that many experts now consider SSP3-7.0 (Regional Rivalry) more plausible than SSP5-8.5, as current policies make the latter's emission trajectory increasingly unlikely. Use high-emission scenarios to: identify physical infrastructure vulnerabilities, test supply chain resilience, evaluate insurance needs, and identify tipping points beyond which business models fail.

Document Assumptions and Justify Choices Transparently

Scenario analysis loses credibility without transparent documentation. Your disclosure should include:

• Which specific scenarios were used (e.g., "SSP1-2.6, SSP2-4.5, and SSP3-7.0") with clear references to climate modeling sources
• Time horizons assessed and why those periods matter for your business
• Key parameters: global temperature rise assumptions, carbon price trajectories, physical hazard changes, technology deployment rates
• Why these scenarios were selected as material to your circumstances
• How scenario insights informed actual strategic decisions

This documentation serves multiple purposes: enabling auditors to verify your analysis, building stakeholder confidence, allowing comparison across years, and forcing internal clarity about assumptions driving decisions. Companies treating scenario analysis as a "check the box" exercise consistently produce vague, unconvincing disclosures that satisfy neither regulators nor investors.

Translating Scenario Insights into Strategic Action

Building Climate Resilience Across Scenarios

Effective scenario planning identifies actions that increase resilience regardless of which pathway unfolds—so-called "no-regrets" moves—alongside contingent strategies activated as uncertainty resolves.

No-Regrets Actions: Certain measures improve performance across nearly all plausible scenarios: improving energy efficiency reduces costs under business-as-usual whilst preparing for carbon pricing under transition scenarios; diversifying supply chains reduces vulnerability to both physical disruptions and transition-driven cost shocks; investing in renewable energy procurement lowers emissions risk whilst often reducing costs; building organisational capacity for climate risk management delivers value regardless of how severe impacts become.

These actions should form your immediate implementation agenda. They require minimal scenario-specific justification because they deliver value across futures. For many companies, focusing here for the first 2-3 years whilst conducting deeper scenario analysis makes strategic sense.

Scenario-Contingent Strategies: Other actions make sense only under specific scenarios or become necessary at different times depending on which pathway unfolds. Massive capital reallocation toward low-carbon products may be essential under SSP1-2.6 but value-destroying under SSP5-8.5. Relocating facilities to avoid physical risks makes sense under high-emission scenarios but may be unnecessary under rapid mitigation.

The key is identifying signposts—observable indicators telling you which scenario is unfolding—and decision triggers that activate contingent plans. For example: "If EU carbon prices exceed €100/tonne before 2028, accelerate electrification investments; if global emissions have not peaked by 2027, implement coastal facility adaptation plan."

Decarbonisation Pathways Aligned to Transition Scenarios

Transition scenarios should directly inform your decarbonisation strategy. If your scenario analysis suggests SSP1-2.6 or SSP2-4.5 are most relevant—either because policy is driving toward these outcomes or because your stakeholders demand alignment—your business must credibly navigate this transition.

Setting Science-Based Targets: The Science Based Targets initiative provides methodologies for setting emissions reduction goals aligned with specific climate pathways. A 1.5°C target implies roughly 50% absolute emission reductions by 2030 and net-zero by 2050 for most sectors. A 2°C target allows slightly more gradual reduction. Your scenario work should inform which pathway you commit to and whether your targets genuinely align with your stated scenario assumptions.

Technology and Investment Planning: Different scenarios imply different technology deployment rates. SSP1-2.6 assumes rapid progress on renewable energy, energy storage, green hydrogen, and carbon capture—create optionality by tracking these technologies and maintaining ability to adopt them quickly. SSP2-4.5 suggests steadier but meaningful progress—plan for incremental efficiency gains and gradual technology substitution. Build flexibility into capital investment decisions so you can accelerate or decelerate depending on how the transition unfolds.

Portfolio Reorientation for Investors: For venture capital, private equity, and institutional investors, scenario analysis should fundamentally reshape portfolio construction. SSP1-2.6 creates massive opportunity in climate solutions whilst creating growing risk in high-carbon assets. Your portfolio allocation should reflect this—not just through exclusions but through active ESG value creation strategies that position holdings to thrive in transition scenarios.

Adapting to Physical Climate Impacts

Physical risk adaptation becomes more critical under higher-emission scenarios but requires attention across all pathways. Even under aggressive mitigation (SSP1-2.6), we face approximately 1.5°C of total warming—enough to alter precipitation patterns, increase heatwave frequency, and raise sea levels.

Infrastructure Resilience: Assess critical facilities against scenario-specific physical hazards: flooding exposure under different sea-level rise and precipitation scenarios, heat stress impacts on operations and worker safety, water availability under various drought scenarios, and supply route vulnerability to extreme weather. Prioritise adaptations that address multiple hazards or prove valuable across scenarios—elevated electrical equipment protects against flooding regardless of scenario, improved cooling systems address both heat stress and potential future regulation.

Supply Chain Adaptation: Physical impacts often hit supply chains before direct operations. Map your extended supply network against climate hazards under your selected scenarios. Identify critical dependencies on climate-vulnerable regions or processes. Develop supplier diversification strategies, alternative material sources, or vertical integration options that reduce exposure. This work often reveals surprising vulnerabilities—your facility may be climate-resilient whilst depending on a single-source component from a flood-prone region.

Market and Demand Shifts: Physical climate impacts reshape where people live, what they consume, and how they spend. Real estate values shift as climate risks become apparent. Tourism patterns change with altered seasons and extreme heat. Agricultural commodity prices fluctuate with production disruptions. Insurance availability and costs reflect growing risk. Scenario analysis should extend beyond operational impacts to strategic questions about market evolution and customer needs under different climate futures.

Data Sources, Tools, and Professional Support

Accessing Climate Projection Data

Credible scenario analysis requires quality data on how climate variables change under different pathways. Several resources provide this:

CMIP6 Climate Models: The Coupled Model Intercomparison Project Phase 6 provides the scientific foundation for IPCC projections, including data for all SSP-RCP combinations across multiple global climate models. Climate services like the Climate Change Knowledge Portal (CCKP) make this data accessible for specific regions and time periods.

Regional Climate Projections: For site-specific risk assessment, you need downscaled projections showing how temperature, precipitation, and extreme events change in your actual operating locations. Services providing these projections typically require specifying your RCP scenarios of interest and geographic coordinates.

Sectoral Climate Data: Beyond basic climate variables, sector-specific services provide agricultural yields under different scenarios, water stress indicators, energy demand projections, or infrastructure failure risks. These translate raw climate projections into business-relevant metrics.

When selecting data sources, verify they use the latest IPCC-aligned scenarios (SSP-RCP combinations, not standalone RCPs), provide transparent methodology and uncertainty ranges, cover your relevant time horizons and locations, and update regularly as climate science evolves. Using open-source climate data where available reduces costs whilst maintaining scientific rigour.

Scenario Analysis Tools and Platforms

Various platforms support climate scenario analysis, from free tools for initial screening to sophisticated commercial platforms for detailed assessment:

Free and Open-Source Tools: Several organisations provide basic scenario analysis tools. The TCFD (now ISSB) Knowledge Hub offers scenario analysis guidance and templates. Regional development banks publish climate risk screening tools for specific geographies. These work well for initial assessment and smaller companies with limited budgets.

Commercial Platforms: Companies requiring detailed analysis often use specialised software that combines climate projections, asset-level exposure mapping, financial impact modelling, and disclosure reporting. These platforms typically support multiple scenario frameworks, integrate with your asset and operational data, generate audit-ready reports, and update as standards evolve. The investment pays off for companies with complex operations, significant climate exposure, or demanding stakeholder requirements.

Consulting-Supported Analysis: For many companies, engaging climate risk consultants delivers the best results. Expert support helps with scenario selection appropriate to your circumstances, data interpretation and assumption setting, translating projections into business impacts, integration with strategy and risk management, and producing credible disclosures that satisfy auditors and investors.

How Fiegenbaum Solutions Supports Climate Scenario Planning

Fiegenbaum Solutions brings over 15 years of sustainability and climate risk expertise to help companies navigate scenario analysis complexity whilst building genuine strategic value. Our approach integrates climate science with business strategy:

Scenario Selection and Materiality Assessment: We work with you to identify which scenarios genuinely matter for your business, considering industry dynamics, geographic exposure, strategic time horizons, and stakeholder expectations. This focuses analytical effort where it delivers real insight rather than generic compliance.

Data Integration and Analysis: We access and interpret climate projection data, translating scientific outputs into business-relevant metrics. This includes mapping your assets and operations against scenario-specific hazards, modelling financial impacts across scenarios, and identifying critical assumptions and uncertainties.

Strategic Integration: Climate scenarios inform strategy only when properly integrated into decision-making. We help embed scenario insights into capital allocation, risk management, innovation priorities, and stakeholder communications. This ensures analysis drives action rather than producing reports that sit on shelves.

Disclosure and Compliance: Our support extends to producing audit-ready documentation meeting CSRD climate risk reporting requirements, ISSB standards, and investor expectations. We ensure your disclosures clearly communicate scenario choices, assumptions, impacts, and strategic responses.

For companies at different stages—from initial screening to sophisticated multi-scenario modelling—we offer flexible engagement models including project-based scenario analysis, ongoing climate risk advisory, integration with broader ESG strategy development, and capability building for internal teams. Contact us to discuss how scenario planning can strengthen your climate resilience and strategic positioning.

Frequently Asked Questions

What is the most probable RCP scenario for business planning?

There's no single "most probable" scenario—that's precisely why scenario analysis uses multiple pathways. Current emission trajectories suggest we're tracking closest to SSP2-4.5 or SSP3-7.0, implying 2-3°C of warming by 2100. However, policy acceleration could still achieve SSP1-2.6, whilst policy failure could lead toward SSP5-8.5 outcomes. Rather than betting on one scenario, robust strategy addresses the broad range of plausible futures whilst monitoring signposts indicating which pathway is unfolding.

What is the RCP 8.5 scenario for climate change?

RCP 8.5 represents the highest emission pathway, originally designed to model a world with continued fossil fuel dependence, minimal climate policy, and total radiative forcing reaching 8.5 watts per square metre by 2100. Under this scenario, greenhouse gas concentration could exceed 2,000 ppm CO₂-equivalent, producing approximately 3.7°C of global temperature rise by 2100 with warming continuing beyond. When combined with SSP5 (Fossil-Fuelled Development), it assumes rapid technological progress and economic growth but disregard for environmental boundaries. Recent research suggests this scenario is increasingly unlikely given current policy trends, making SSP3-7.0 potentially more relevant as a high-risk planning scenario.

What is the RCP 2.6 scenario?

RCP 2.6 (now typically referenced as SSP1-2.6) represents an aggressive mitigation pathway consistent with limiting global warming to approximately 1.5-2°C above pre-industrial levels. It assumes greenhouse gas emissions peak before 2020, decline rapidly through mid-century, and reach net-zero or net-negative levels by 2100, producing radiative forcing of 2.6 watts per square metre. This scenario requires transformative changes: near-complete decarbonisation of electricity by 2050, massive deployment of renewable energy and energy storage, significant carbon dioxide removal, and fundamental shifts across transport, industry, and agricultural land use. For businesses, RCP 2.6 creates maximum transition risk whilst limiting physical risks to manageable levels.

What are the 5 scenarios of IPCC?

The IPCC Fifth Assessment Report originally featured four RCP scenarios (2.6, 4.5, 6.0, and 8.5) based purely on emission trajectories. The IPCC Sixth Assessment Report evolved this framework by integrating five Shared Socioeconomic Pathways (SSPs) with Representative Concentration Pathways, creating combined SSP-RCP scenarios. The five SSPs are: SSP1 (Sustainability), SSP2 (Middle of the Road), SSP3 (Regional Rivalry), SSP4 (Inequality), and SSP5 (Fossil-Fuelled Development). Each SSP can combine with different RCPs, though certain pairings are more commonly used: SSP1-2.6, SSP2-4.5, SSP3-7.0, and SSP5-8.5. This framework allows modelling of different socio-economic futures producing different emission trajectories, enabling more nuanced business scenario planning that accounts for both climate change and the socio-economic context driving it.

How do I choose between SSP1-2.6 and SSP5-8.5 for my business?

You shouldn't choose—use both, alongside a middle scenario like SSP2-4.5. SSP1-2.6 tests your strategy against aggressive climate action and maximum transition risks. SSP5-8.5 (or SSP3-7.0 as a more plausible alternative) tests resilience to severe physical impacts. The middle scenario explores partial mitigation. This portfolio approach identifies strategies robust across outcomes, pinpoints vulnerabilities requiring contingency planning, and demonstrates to stakeholders that you've seriously considered different futures. Your specific business circumstances determine scenario emphasis—carbon-intensive companies should weight transition scenarios, whilst those with concentrated physical exposure or long-lived coastal assets must seriously model high-emission physical risks.

How often should we update our climate scenario analysis?

Climate scenario analysis requires periodic refresh, though not constant revision. Formal updates should occur every 2-3 years or when significant changes occur: major strategic shifts affecting climate exposure, material changes in climate science or scenario frameworks, new regulatory requirements with different scenario specifications, or substantial divergence between observed conditions and scenario projections. Between formal updates, monitor key indicators—actual emissions trajectories, policy developments, technology costs, physical climate impacts—comparing these against your scenario assumptions. If reality consistently deviates from your scenarios, earlier revision may be warranted. The goal is maintaining scenario analysis that genuinely informs strategy rather than becoming outdated compliance documentation.

What's the difference between climate scenarios and climate projections?

Climate scenarios describe plausible future pathways based on different assumptions about emissions, policies, technology, and socio-economic development—they're essentially "what if" stories. Climate projections are quantitative estimates of how the climate system will respond under specific scenarios, generated by global climate models. Think of scenarios as the narrative inputs (SSP1-2.6, SSP5-8.5) whilst projections are the scientific outputs (2°C warming, 50cm sea level rise). For business planning, you select scenarios relevant to your strategy, then use projections showing how temperature, precipitation, extreme events, and other climate variables change under those scenarios at your specific locations and time horizons. Both elements are essential—scenarios frame which futures to consider, projections quantify what those futures mean physically.

Key Takeaways and Strategic Recommendations

Climate scenario planning has evolved from niche exercise to strategic imperative. The shift from standalone RCPs to integrated SSP-RCP frameworks, the transition from TCFD to mandatory ISSB standards, and active CSRD enforcement mean companies can no longer treat scenario analysis as optional or purely qualitative.

Effective scenario planning requires using multiple pathways—typically at least SSP1-2.6 (testing transition resilience), SSP2-4.5 (baseline planning), and either SSP3-7.0 or SSP5-8.5 (physical risk stress test). Your selection should reflect specific exposure: carbon-intensive businesses weight transition scenarios, whilst those with concentrated physical assets or climate-vulnerable supply chains emphasise high-emission pathways.

The strategic value lies not in predicting the future but in building resilience across futures. Identify no-regrets actions delivering value regardless of which scenario unfolds—energy efficiency, supply chain diversification, renewable energy procurement. Develop contingent strategies activated as uncertainty resolves, using observable signposts to trigger implementation. Integrate scenario insights into capital allocation, risk management, innovation, and stakeholder communications rather than treating analysis as standalone compliance.

Current trajectories suggest global warming has reached 1.1-1.2°C above pre-industrial levels, with 1.5°C likely breached in the early 2030s under most scenarios. This reality demands action now. Global clean energy investment already exceeds fossil fuels by 2:1, creating unprecedented opportunities for companies positioned to thrive in the transition. Those failing to adapt face growing transition risks under ambitious climate policy and escalating physical risks under high-emission scenarios.

For companies uncertain where to begin, conducting financial materiality screening identifying climate-related risks most relevant to your business provides a strong foundation. Building on this, develop clear scenario analysis governance—who owns the process, how often it updates, how insights inform decisions. Engage professional support where needed to ensure analysis meets regulatory requirements whilst generating genuine strategic value. Most importantly, recognise that climate scenario planning is not a one-time project but an ongoing capability that strengthens as climate change accelerates and stakeholder expectations rise.

References

Intergovernmental Panel on Climate Change. (2021). Climate Change 2021: The Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report. Cambridge University Press.

IFRS Foundation. (2023). IFRS S2 Climate-related Disclosures. International Sustainability Standards Board.

European Commission. (2023). Corporate Sustainability Reporting Directive (CSRD). Official Journal of the European Union.

Swiss Re Institute. (2024). Natural Catastrophes and Economic Losses: The Economics of Climate Change. Swiss Re.

International Energy Agency. (2024). World Energy Investment 2024. IEA Publications.

O'Neill, B. C., et al. (2016). The Scenario Model Intercomparison Project (ScenarioMIP) for CMIP6. Geoscientific Model Development, 9(9), 3461-3482.

Task Force on Climate-related Financial Disclosures. (2017). Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures. Financial Stability Board.