Climate scenario analysis is an analytical tool used to explore and assess different plausible future climate and socio-economic scenarios to understand their potential impacts on organizations, economies, and societies.This method involves creating narratives to outline potential future states of the world. Originally developed in the 1950s for academic research, it quickly found applications in large corporations and is now extensively used to analyze climate risks.Global reference scenarios, often proposed by organizations like the IPCC, include projections of future emissions and socio-economic narratives. These scenarios, such as Representative Concentration Pathways (RCPs) and Shared Socioeconomic Pathways (SSPs), help in understanding the potential impacts of different climate futures.For example, RCP 2.6 aims to keep global warming below 2°C by drastically cutting emissions, while RCP 8.5 assumes continued high emissions leading to significant warming. These scenarios are crucial for analyzing both transition risks, such as policy changes and economic shifts, and physical risks, like temperature rise and extreme weather events.Companies like HSBC use climate scenario analysis to stress test their portfolios against different climate futures, ensuring they are prepared for potential risks. Similarly, Ortec Finance's Climate PREDICT model forecasts extreme weather impacts, helping businesses plan for future resilience.