Recalibrating climate risk: New report urges governments and investors to fix ‘faulty radar’ in climate damage models

The Recalibrating Climate Risk report explains why economic models used by governments, central banks and investors are increasingly understating climate risks as the world moves towards 2°C. It shows how this can create a false sense of security – and calls for closer collaboration between climate scientists, economists, regulators and investors. Led by the University of Exeter’s Green Futures Solutions team, in partnership with Carbon Tracker, the report draws on expert judgement from climate scientists across 12 countries to clarify where today’s ‘damage models’ fall short and what decision-makers should do to manage investment risks under rising uncertainty.

The report builds on earlier work challenging the under-pricing of climate damages in financial decision-making, including Carbon Tracker’s Loading the DICE Against Pensions (2023) and The Emperor’s New Climate Scenarios (IFoA/University of Exeter, 2023). The new report sets out – in detail – the flaws in current approaches to damage modelling, new measures to improve these models, and implications for regulators, investors and scenario providers.