On May 7, 2025, the Network for Greening the Financial System (NGFS) released its first set of short-term climate scenarios[1], marking a major step toward enabling banks and insurers to quantify how imminent climate events could affect their balance sheets.
SS&C Algorithmics is happy to announce that our solution, Algo Climate Scenarios for Transition and Physical Risk, powered by CLIMAFIN, supports short-term NGFS scenarios from day one.
Why the NGFS Short-Term Scenarios Matter
The long-term NGFS scenarios relied on Integrated Assessment Models (IAMs) to chart broad transition pathways, aiming at a strategic risk assessment (targeting year 2050 and beyond) but lacking macro-financial detail.
Instead, the new NGFS short-term scenarios focus on the near-term (3–5 year) outlook. They capture immediate climate shocks and their interaction with macro-financial developments, establishing a consistent, granular modeling framework particularly well-suited for climate stress-testing exercises over a business-planning timeframe.
Key Short-Term Scenario Pathways
These scenarios help financial institutions understand how climate events and policy actions—or inaction—could materially impact the global economy and financial stability today. The NGFS outlines four key pathways:
These scenarios underscore how short-term GDP losses could reach up to 12.5%[2] in worst-case scenarios (e.g., a severe climate disaster in an emerging economy). The implications include rising default probabilities, financial market volatility and cascading effects across global supply chains.
These advanced scenarios have been developed with fundamental contributions from CLIMAFIN[3], a science-based fintech specializing in climate-related financial modeling. Working with E3-Modelling and the International Institute for Applied Systems Analysis (IIASA), CLIMAFIN ensured the NGFS short-term scenarios are grounded in robust economic and environmental science.
How SS&C Algorithmics Supports Climate Risk Preparedness
To operationalize these scenarios, financial institutions need tools that can translate qualitative narratives into quantifiable impacts on asset valuations and risk analytics. SS&C Algorithmics partnered with CLIMAFIN to deliver an integrated solution for climate stress testing to meet the expectations of supervisors[4], as well as internal and external stakeholders.
Our integrated platform allows institutions to:
Preparing for What’s Next
These NGFS scenarios are likely to form the basis of upcoming regulatory climate stress tests. Moreover, regulatory requirements and sustainability targets are growing over time, so we are committed to future-proofing our solutions. That includes supporting transition pathways tailored to your business model and integrating climate-adjusted market and credit VaR in the risk and capital management framework.
The NGFS cautions that even these new scenarios may underestimate the true magnitude of climate-related risks, especially in the face of potential tipping points or compound events. As climate risk shifts from a long-term concern to a near-term financial reality, financial institutions must act now—not only to remain compliant, but also to remain resilient.
Contact us to learn more about these new scenarios and how SS&C can help.
References
[1] Network for Greening the Financial System. (2025). First vintage of NGFS short-term climate scenarios. https://www.ngfs.net/en/press-release/ngfs-publishes-first-vintage-short-term-climate-scenarios
[2] Battiston, S., Laureti, P. (2024). Overcoming the Challenges of Climate Risk Regulations: A Guide to Climate Stress Test Implementation. /resources/form/assessing-materiality-climate-risks
[3] CLIMAFIN project overview: https://www.finexus.uzh.ch/en/projects.html
[4] NGFS Conceptual Note on Short-Term Scenarios (2024):