NGFS Report on Integration of G-Cubed Model into NGFS Scenarios
The Network for Greening the Financial System (NGFS) published a report that explores the feasibility of integrating the G-Cubed general equilibrium model into the NGFS suite of models.
The G-Cubed pilot project was commissioned in 2021 to understand how the G-Cubed general equilibrium model could be utilized to increase the sectoral granularity of the NGFS scenarios. G-Cubed is a multi-country, multi-sectoral model with detailed representation of the macroeconomy. The project objective was to understand whether the G-Cubed general equilibrium model could be used to expand the sectoral coverage of the existing NGFS scenario pathways. Such sectoral pathways would enrich the analytical depth of the NGFS scenarios, enabling users to explore how the physical and transition risk narratives could unfold within particular areas of the real economy and within an increased number of world regions. The project builds on two previous iterations of NGFS scenarios: In 2020, NGFS released its first set of iterations in Phase I and included six scenario narratives covering a broad range of physical and transition related risks. Then, in 2021, the six scenario narratives were expanded in Phase II, when a set of macroeconomic variables were added (via the global macroeconomic model NiGEM). To assess the feasibility, three of the Phase II transition risk scenarios were run within G-Cubed—Net Zero 2050, Delayed Transition and Current Policies. The results from the G-Cubed model runs were compared with those of the three integrated-assessment models from Phase II to understand the potential alignment between the two modeling frameworks, and whether the G-Cubed model could be integrated into a further phase of the NGFS scenarios.
The report intends to make the lessons learned from the G-Cubed pilot project freely available to those seeking practical insights on the expansion of climate scenarios and for those with a general interest in different approaches to the modeling of climate-related risks. The report findings suggest that the benefits of integrating the G-Cubed model into the NGFS scenarios package are material and present a valuable means to understand how the scenarios will play out within specific sectors of the economy or at the regional level. Following the completion of this project, potential next steps may include:
- exploring the potential inclusion of G-Cubed within the scenarios package that could take a number of forms, focusing on the sectoral outputs or alignment more broadly.
- exploring challenges in full integration of the G-Cubed model, or lower the potential for coherence among these models in a future package.
Related Link: Report on Integration of G-Cubed Model
Keywords: International, Banking, ESG, Climate Change Risk, Physical Risk, Transition Risk, Scenario Analysis, G-Cubed Pilot Project, NGFS Models, G-Cubed Model, Stress Testing, NGFS
Featured Experts

Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.

Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager

James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Related Articles
APRA Publishes Results of Climate Risk Self-Assessment Survey
The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance, and superannuation industries.
ACPR Publishes Updates Related to CRD IV and Covered Bonds
The French Prudential Supervisory Authority (ACPR) published a notice related to the methods for calculating and publishing prudential ratios under the Capital Requirements Directive (CRD IV) and the minimum requirement for own funds and eligible liabilities (MREL).
BIS Paper Contributes to Debate on Regulating NBFIs and Big Techs
The Financial Stability Institute (FSI) of the Bank for International Settlements recently published a paper proposing a framework for classifying financial stability regulation as either entity-based or activity-based.
EIOPA Publishes Guidance on Climate Change Scenarios in ORSA
The European Insurance and Occupational Pension Authority (EIOPA) published the risk dashboard based on Solvency II data and the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA).
EBA and ECB Respond to Proposals on Sustainability Disclosures
The European Banking Authority (EBA) and the European Central Bank (ECB) published their responses to the consultations of the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.
BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks
A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.
EBA Publishes Multiple Regulatory Updates for Regulated Entities
The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.
EIOPA Issues SII Taxonomy and Guide on Sustainability Preferences
The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.8.0 of the Solvency II data point model (DPM) and XBRL taxonomy.
EESC Opines on Proposals on CRR and European Single Access Point
The European Union published, in the Official Journal of the European Union, an opinion from the European Economic and Social Committee (EESC); the opinion is on the proposal for a regulation to amend the Capital Requirements Regulation (CRR).
HM Treasury Publishes Multiple Regulatory Updates in July 2022
HM Treasury published a draft statutory instrument titled “The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022,” along with the related explanatory memorandum and impact assessment.