Staying Current: Essential Updates from the Network for Greening the Financial System (NGFS)

David Kim|Finance|August 25, 2025

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Understanding the Network for Greening the Financial System (NGFS)

The Network for Greening the Financial System (NGFS) is a coalition of central banks and financial supervisors established in 2017 at the Paris One Planet Summit. Its mission is to strengthen the global response to climate change by developing best practices, conducting research, and supporting the transition to a sustainable economy. As of March 2025, the NGFS comprised 144 central banks and supervisors, along with 21 observers, representing a significant share of the world’s financial systems [1] .

Recent NGFS Scenario Updates: Focus on Short-Term Climate Risks

In May 2025, the NGFS unveiled a new suite of short-term scenarios designed to help central banks, supervisors, and financial institutions assess the impacts of climate policy and physical climate risks over the next five years, through 2030 [1] . These scenarios are more closely aligned with business and policy cycles, offering granular and actionable data for investment decisions, risk management, and regulatory planning.

Key features of the 2025 short-term scenarios include:

Integration of Compound Extreme Events: Modeling now accounts for simultaneous hazards such as floods and storms, as well as heatwaves, droughts, and wildfires.
Cross-Regional Shock Transmission: The scenarios reflect how economic and physical shocks can spill over between regions through trade and financial links.
Macro-Financial Framework: The models incorporate variables such as GDP, inflation, sectoral growth, and population trends, referencing projections from the October 2023 IMF World Economic Outlook.
Business Cycle Relevance: The focus is on a timeframe (to 2030) that matches the planning horizons of most financial institutions, enabling more practical, decision-focused risk analysis.
Granular Sector and Country Data: The scenarios include detailed data to assess inflationary and sector-specific impacts of climate damages.

Practically, these scenarios support stress testing, capital planning, and the design of climate-related financial disclosures. For instance, a bank or insurer can use these models to estimate the effect of severe weather on loan portfolios or insurance claims, adjusting risk appetites and pricing accordingly [1] .

Projected Economic Impacts and Real-World Examples

New NGFS analysis suggests that climate disasters could reduce global economic growth by up to 3% within the next five years, absent significant mitigation efforts [5] . The scenarios offer four distinct pathways:

Orderly transition with gradual policy implementation and adaptation
Disorderly transition triggered by sudden, aggressive climate policy shifts
Physical risk scenario marked by extreme weather and policy stagnation
Combined scenario where both physical and transition risks materialize simultaneously

For example, a regional bank with significant exposure to agricultural loans may use the physical risk scenario to model the impact of concurrent droughts and heatwaves on loan defaults. Conversely, a global insurer might focus on transition scenarios to adjust investment portfolios in anticipation of rapid policy changes that affect carbon-intensive sectors.

U.S. Agency Withdrawals: Implications and Next Steps

In January 2025, major U.S. financial authorities-the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Department of the Treasury’s Federal Insurance Office (FIO)-announced their withdrawal from the NGFS [4] [3] . The stated reason was that the scope of NGFS activities had expanded beyond these agencies’ statutory mandates. While this marks a significant shift in U.S. participation, other global members continue to leverage NGFS resources for climate risk management.

Despite these withdrawals, U.S. financial institutions and regulators may still reference NGFS materials for scenario planning and risk assessments. Stakeholders interested in U.S. participation or alternatives are encouraged to search for official updates from the Federal Reserve, FDIC, and the Treasury Department regarding climate risk management and sustainable finance. Many U.S. states and agencies continue to support green finance initiatives independently.

Accessing NGFS Resources and Scenario Tools

To access the latest NGFS scenario data, guidance documents, and analytical tools, consider the following steps:

Visit the official NGFS website by searching for “Network for Greening the Financial System” to find scenario documentation, technical guidance, and member lists. The NGFS regularly publishes updates and scenario libraries for use by financial institutions and policymakers.
For detailed scenario data and practical implementation examples, review publications from major climate finance think tanks, such as Carbon Tracker, which provide accessible summaries and technical breakdowns of NGFS materials [1] .
Stay informed about regulatory developments by monitoring press releases and official statements from the Federal Reserve [4] , FDIC, and U.S. Department of the Treasury [3] .
If you represent a financial institution, consider consulting with climate risk modeling specialists or sustainability consultants to integrate NGFS scenarios into your internal risk management processes.

For those seeking ongoing updates, sign up for newsletters or alerts from climate finance organizations and regulatory bodies. Many host webinars, workshops, or release technical notes that help translate scenario analysis into operational strategies.

Implementing NGFS Scenarios in Practice: Step-by-Step Guidance

Adopting NGFS scenarios and frameworks within your organization involves a systematic approach:

Identify Relevant Scenarios: Choose the NGFS scenario(s) that best align with your institution’s risk exposures and planning horizon.
Gather Data Inputs: Collect internal data on asset exposures, sectoral breakdowns, and geographical risk concentrations.
Model Risk Outcomes: Use or adapt available NGFS models, or partner with specialist firms to simulate economic and financial impacts under different climate risk pathways.
Integrate Results into Decision Making: Apply insights from scenario analysis to inform credit risk, investment strategy, capital allocation, and public disclosures.
Engage Stakeholders: Communicate findings and risk management actions to boards, investors, regulators, and clients to demonstrate proactive climate risk management.

Potential challenges include data quality issues, model uncertainty, and evolving regulatory requirements. Solutions involve cross-departmental collaboration, leveraging external expertise, and adopting flexible scenario planning frameworks that can be updated as new information emerges.

Alternatives and Complementary Approaches

If your organization is based in the U.S. or another country where NGFS participation has changed, consider the following alternatives and supplemental strategies:

Leverage Domestic Guidance: Many national regulators and industry associations provide climate risk guidance tailored to local legal and market contexts.
International Best Practices: Consider resources from the Task Force on Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB), which are widely used for climate risk reporting worldwide.
Peer Collaboration: Engage with industry peers through working groups and networks focused on sustainable finance to share insights and develop common approaches.

Key Takeaways and Next Steps

The NGFS continues to play a pivotal role in advancing climate risk management practices for the global financial system. Despite recent U.S. agency withdrawals, the latest scenario updates provide practical tools for financial institutions seeking to understand and respond to near-term climate risks. By leveraging these resources and adopting a proactive, scenario-based approach to risk management, organizations can build resilience and contribute to the sustainable transition.

For ongoing updates, practical resources, and implementation support, search for the official NGFS website, follow recognized climate finance organizations, and monitor communications from your national regulators. Consider subscribing to relevant newsletters or attending industry events to stay informed on best practices and regulatory developments in greening the financial system.