Ultimately, global warming is still limited to 1.8°C by the end of the scenario (2050) relative to pre-industrial levels, but then remains around this level at the end of the century. [8] A ‘no additional action’ (NAA) scenario in which governments around the world fail to enact policy responses to global warming, other than those actions already taken. As a result, global temperature levels continue to increase, reaching 3.3°C higher relative to pre-industrial levels by the end of the scenario. In the scenario this leads to serious environmental impacts, including extreme weather events, destroyed ecosystems and rising sea levels. In some cases these changes are irreversible. While these changes take longer to manifest, they give rise to increasing and irreversible shocks that continue to grow beyond the scenario: UK and global GDP growth are permanently lower and macroeconomic uncertainty increases. Broadly speaking, the first two scenarios focus on risks from the transition to net zero, whereas the third one focuses on physical risks from climate change. And to reiterate a theme I will come back to later, the risks from climate change have been managed by the end of the first two scenarios – whereas in the third they continue to build. CBES headlines The results of the CBES were published today, and I would encourage anyone with an interest in  Page 5  this topic to read them in full.
Getting our core job right, and so maintaining financial stability, is far and away the most important thing we can do to support the fight against climate change. Achieving net zero will not be possible unless our societies make considerable investments in developing and disseminating new technologies, and will require major changes across the economy. A stable financial system can support households and businesses through these changes, and channel investment where it needs to go to support the transition. Transitioning to net zero will be a major challenge for our institutions and societies even in a benign economic environment – doing so without confidence in the basic functioning of the financial system would be near impossible. It is therefore vital that firms can withstand risks to their safety and soundness, including those that arise as a consequence of climate change – both ‘physical’ risks like flooding and extreme weather events, and ‘transition’ risks that arise as the economy moves away from carbon-intensive activities. Firms therefore need to understand, at a granular level, how their balance sheets and business models are exposed to both present and future climate risks, so that they can take the right risk management actions today. This includes investing in their data and modelling capabilities, and  Page 3  carefully scrutinising the data they get from third parties. It means ensuring Boards and senior executives see climate risk as a strategic priority. [3] And ultimately, it means ensuring firms hold sufficient financial resources to absorb losses arising from climate change.