In climate finance, not all scenarios are created equal.
Some model temperature.
Others model shock.

Together, they shape how investors, banks, and increasingly, venture capital funds, model climate exposure and opportunity.

If you’re a founder or VC, you don’t need to become a climate scientist.
But you do need to understand the difference between temperature-based and event-based scenarios because they define how your company’s future gets priced.

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What are climate transition scenarios (really)?

Climate transition scenarios are structured “what-if” futures: they model how different levels of climate action or inaction change the global economy.

They originated in the Task Force on Climate-related Financial Disclosures (TCFD) and central bank research.

Banks use them to run climate stress tests.
Investors use them to map exposure and opportunity.
And now, VCs are learning to read them because LPs are asking for it.

The goal isn’t to predict the future, it’s to price readiness across multiple futures.

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The two main types of climate transition scenarios

There are two primary approaches used by financial institutions and regulators:
temperature-based and event-based. Both are tools to test resilience but they tell very different stories.

(a) Temperature-based scenarios

Definition: These scenarios model what the world looks like under different long-term warming outcomes; 1.5°C, 2°C, 3°C, or 4°C above pre-industrial levels.

They assume a sequence of policy actions, energy transitions, and market behaviours consistent with each pathway.

Used by:

• The Intergovernmental Panel on Climate Change (IPCC)
• The Network for Greening the Financial System (NGFS)
• Banks implementing TCFD-aligned risk assessments

Why it matters for VCs and Startups: Temperature-based scenarios reveal structural market shifts; the slow, systemic forces shaping which industries grow and which decline.

• In a 1.5°C world, innovation explodes: capital flows to clean tech, climate analytics, and electrification.
• In a 3–4°C world, resilience becomes the market: insurance, cooling, water systems, logistics re-engineering.

Startups that align with these long-term pathways don’t just survive, they compound.

Funds that invest with these signals outperform those that ignore them.

Temperature scenarios are your “macro playbook.” They tell you which economies and sectors will exist in 10–20 years.

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(b) Event-based scenarios

Definition: Event-based scenarios model the short-term shocks, such as, sudden regulatory, technological, or physical events that disrupt markets and portfolios.

Think of them as “financial stress tests” for climate risk.
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Examples include:

• A sudden global carbon tax doubling manufacturing costs overnight.
• A rapid ban on combustion engines accelerating EV adoption.
• A major technological breakthrough in energy storage that wipes out fossil valuations.
• A geopolitical shock tied to critical mineral scarcity.

Used by:

• Banks and central banks for climate stress testing
• Insurance firms and infrastructure investors
• Increasingly, climate-focused VC and growth equity funds

Why it matters for VCs and Startups: Event-based scenarios capture the volatility layer unraveling how climate transition shocks change funding cycles, valuations, and exits.

• Founders feel it when energy costs spike mid-round.
• Investors feel it when a regulation kills an entire sub-sector overnight.
• Markets feel it when an unexpected breakthrough rewires demand.

These scenarios test short-term resilience not whether your product is sustainable, but whether your business model can pivot under stress.

Event-based scenarios are your “tactical radar.” They test how you’d survive a disruption tomorrow.

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How do climate scenarios affect VC funds and early-stage startups

Venture capital is inherently about timing and timing is what climate scenarios are designed to test.

• Temperature-based thinking helps funds identify where long-term tailwinds are forming. (Clean data, climate AI, circular logistics, regenerative agriculture.)
• Event-based thinking helps funds anticipate short-term volatility. (Policy shocks, tech breakthroughs, carbon repricing.)

The funds that combine both build anti-fragile portfolios resilient across transition speeds.

Smart VCs don’t pick sectors. They pick systems that win in multiple futures.

‍Founders can use these frameworks to understand where risk or opportunity hides in their market.

Ask yourself:

• Would my product thrive or fail if governments move faster on climate?
• What if energy or carbon costs suddenly double?
• How would my customer base change if climate volatility spikes?

If you can answer those questions, you’re already doing scenario analysis, just without the spreadsheets.

That’s the level of foresight LPs and later-stage investors increasingly expect.

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How LP pressure is pushing climate scenario analysis downstream

Institutional LPs are now requesting annual ESG and climate data.

That means VCs are starting to adopt the same scenario logic used by banks: testing how their portfolio would behave in both rapid and disorderly transitions.

It’s not academic. It’s survival.

Because the next time a carbon policy, energy price spike, or weather event hits, LPs will ask:

“Did you model this?”

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The Planicorn takeaway

Event-based and temperature-based scenarios aren’t just scientific tools.
They’re becoming investment frameworks defining how capital prices exposure and rewards foresight.

Founders who understand both will raise faster.
Funds that model both will raise smarter.

Because in venture, you don’t get to choose your climate scenario, but you can choose how ready you are for any of them.

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At Planicorn

We help venture funds and founders translate climate scenario analysis into practical strategy connecting investor mandates, risk data, and opportunity mapping. Because in uncertain markets, readiness is the real alpha.