Decision making under deep uncertainty: Climate science, policy and finance

Climate change confronts decision-makers with uncertainty that cannot be reduced to a single forecast or a well-defined probability distribution. Uncertainty runs through the whole chain. It starts with the physics of the climate system, continues through emissions pathways shaped by policy, technology, demographics and litigation, and ends with the economic damages and financial losses that follow.

• Regulators are setting expectations for how climate risk enters firm decisions, risk appetite, and strategy.
• Companies, including banks, insurers, asset managers and the firms they finance, must turn those expectations into real decisions.
• Researchers must identify where current knowledge falls short and provide the tools to close those gaps.

Robust decisions under deep uncertainty need all three working from a shared understanding of what we know, what we don't, and what to do in the meantime.

Bringing these perspectives together, join David Wilkinson (Bank of England, Prudential Regulation Authority) as he discusses how supervisory expectations under SS5/25 can move firms from regulatory compliance to genuinely decision-focused use of climate scenarios; George Spill (Senior Data Scientist, Planetrics) will explain how physical climate science and scenario modelling are turned into financial risk assessment, and where standard scenarios may understate tail risks; and Michael Barnett (Arizona State University) will discuss his research on how policy and valuation should respond to how climate change translates into economic damage, and when the models themselves may be wrong.