The Network for Greening the Financial System (NGFS) published an Occasional Paper reporting results from a second modelling team that reproduced key NGFS short-term climate scenario narratives using the NiGEM macroeconometric model and compared them with the official short-term scenario outputs produced under the NGFS suite-of-models framework. The comparison highlights how modelling architecture and expectations formation can materially change the timing and magnitude of GDP, inflation and monetary policy responses under the same transition and physical risk narratives. The exercise reruns three short-term scenario narratives over a roughly five-year horizon: Highway to Paris (orderly transition), Sudden Wake-Up Call (disorderly transition) and Disasters and Policy Stagnation (physical risk shocks from extreme weather events in 2026–2027, presented in five regional variants). Across the transition scenarios, NiGEM generally produces smoother inflation dynamics and more gradual output adjustments than the framework combining GEM-E3, EIRIN and CLIMACRED, with differences depending on whether NiGEM is run under rational or adaptive expectations. In Sudden Wake-Up Call, the inflation peak in EIRIN is much sharper (including up to 6 percentage points in North America) and is associated with stronger policy rate increases in the Americas (up to 6 percentage points in South America), while NiGEM shows a more gradual rise in inflation and a milder response. For Disasters and Policy Stagnation, NiGEM shows more muted and delayed GDP impacts, whereas the suite-of-models results show sharper declines followed by faster recovery; NiGEM also produces more pronounced policy rate reductions after output contracts in North America and Europe. Given NiGEM’s aggregated structure, the comparison does not extend to sectoral or credit-risk outputs produced by the suite-of-models approach. The paper is accompanied by the full set of NiGEM simulation results and is published in the NGFS Occasional Paper series, which is steered by NGFS members but not endorsed by the NGFS.
Network for Greening the Financial System 2026-02-03
Network for Greening the Financial System publishes NiGEM-based cross-check of its short-term climate scenarios
The Network for Greening the Financial System (NGFS) released an Occasional Paper comparing short-term climate scenario narratives using the NiGEM macroeconometric model with the NGFS suite-of-models framework, highlighting differences in GDP, inflation, and monetary policy responses. The NiGEM model shows smoother inflation dynamics and more gradual output adjustments compared to the sharper peaks and policy rate changes in the NGFS framework.