Embedding Climate Change in Strategic Investment Decision-Making: Developing a Global Timber Resource Constraint Under Climate Scenarios

Abstract

Climate change is a growing risk to the private sector. Research has shown that today’s financial assets at risk from climate change total between US$2.5 trillion and $24.2 trillion by 2100 . To mitigate this, our client, Ortec Finance, provides information to their clients on the macro-economic risks from climate change to inform their investment decisions. Our team helped Ortec Finance refine their Systemic Climate Risk-Aware Scenarios Sets by developing a natural resource constraint for the forestry sector to improve the accuracy of GDP impact projections. We worked with our strategic research partner, CICERO, to produce impact functions that showcase micro-economic changes in regional forest product markets under different climate scenarios. Our team developed a methodology and compiled a robust dataset capturing changes in available timber volume in country-level planted forests under baseline, RCP2.6, RCP4.5 and RCP8.5 scenarios. Available timber volume in temperate forests is predicted to increase under RCP2.6 compared to baseline. We also demonstrate that under RCP2.6, some regions experience an increase in forest product price and production value. These regions include Africa, Eastern Asia and Latin America after adjusting for changes in economic value and demand.