In climate models, the world has three possible futures.

In venture capital, those futures translate into three different markets, valuations, and types of startups that win.

Welcome to climate transition scenarios, the financial world’s way of stress-testing what happens when the global economy rewires itself for carbon.

And whether you’re an investor or a founder, your business already lives in one of them.

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What are climate transition scenarios?

Regulators, central banks, and investors use climate transition scenarios to model how the world might respond to rising temperatures.

Each scenario blends policy, technology, and behaviour assumptions and each has different consequences for capital.

Think of them as economic “what-if” futures:

• What if governments act fast?
• What if they wait too long?
• What if markets lead the transition instead of regulation?

The Task Force on Climate-related Financial Disclosures (TCFD) and central banks like the Bank of England use these scenarios to model how climate policy or delay affects industries, balance sheets, and growth.

But for startups and VCs, these same models define where opportunity and risk will concentrate next.

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The three core climate scenarios (and what they mean for venture)

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(a) The rapid transition — 1.5°C world

Definition: Strong and immediate action. Governments enforce strict carbon pricing. Fossil fuels phase out fast. Capital floods into clean tech, electrification, and adaptation.

‍For Startups:

• Explosive opportunity in climate tech, energy storage, grid software, EV infrastructure, carbon markets, regenerative ag, and green finance.
• But early-stage risk spikes: policy shifts fast, incumbents adapt aggressively, and “transition shock” hits unprepared sectors.
• High reward, high volatility; perfect for founders who can move faster than regulation.

For VCs:

• Massive upside for funds positioned in transition-enabling tech.
• Green premiums rise; brown discounts accelerate.
• LPs reward funds that can quantify transition exposure where ESG integration becomes a competitive advantage, not a checkbox.

Summary: The 1.5°C world is hyper-growth for sustainability-led innovation, but brutal for laggards.

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(b) The managed transition — 2°C world

Definition: Policy and market forces evolve gradually. Governments act, but unevenly. Industries decarbonize over decades instead of years.

For Startups:

• Broader space for hybrid models: software for emissions tracking, embedded sustainability in fintech, or low-carbon logistics.
• Opportunity in transition enablers: data, analytics, and integration tools that help traditional sectors comply.
• Market timing matters: some sectors (energy, materials, transport) shift earlier, others follow capital flows.

For VCs:

• Portfolio construction becomes key.
• Funds must balance short-term SaaS growth with long-term transition plays.
• ESG and climate due diligence become baseline investor hygiene...not differentiation.

Summary: The 2°C world is steady transition, lower risk, but slower returns. The winners are funds that can underwrite long horizons without overpaying for hype.

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(c) The delayed transition — 3–4°C world

Definition: Limited policy action. Markets underprice climate risk. Physical damages rise, such as, floods, droughts, heatwaves, and energy instability.

For Startups:

• Operating costs climb as infrastructure and insurance costs rise.
• Supply chains destabilise. Extreme weather hits data centres, logistics, agriculture, and energy.
• “Climate adaptation” becomes its own vertical: resilience tech, cooling solutions, insurance innovation, and supply chain rerouting tools.

For VCs:

• Valuations compress in exposed sectors.
• LPs tighten scrutiny, capital flows toward resilience funds and away from unhedged portfolios.
• Exit timelines stretch as systemic volatility grows.

Summary: The 4°C world rewards survivors, not disruptors. Venture still exists, but it’s defensive, not expansive.

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How scenario thinking is entering venture capital

Climate scenario analysis started in banks and central banks, but it’s now making its way into VC investment memos.

Why? Because LPs are asking funds to show exposure.

That means VCs now need to understand:

• Which startups gain or lose value in rapid vs. delayed transition worlds?
• How climate volatility could affect exit routes or acquisition appetite?
• What happens to valuations if regulation accelerates faster than expected?

Scenario analysis isn’t about predicting the future. It’s about pricing readiness for all of them.

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What founders can learn from this

Founders don’t need to run climate models, they just need to know which world their product depends on.

Ask yourself:

• Does your business model rely on cheap energy or carbon-heavy logistics?
• Would regulation or carbon taxes accelerate or destroy your growth?
• In a 4°C world, would your supply chain or customer base still exist?

Founders who understand their “scenario sensitivity” can talk to investors in the same language LPs now use and that’s how you de-risk your narrative.

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The strategic takeaway for venture funds

Scenario planning is becoming a due diligence standard.
The smartest VCs will:

• Build internal climate risk maps across their portfolios.
• Stress-test exit strategies under different transition speeds.
• Position funds not as green but as resilient.

Climate scenario thinking won’t replace market analysis, it will refine it.

Because the next time a flood wipes out a semiconductor supplier, or a new carbon policy rewires consumer pricing, it won’t be “unexpected.”

It’ll be modeled.

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The Planicorn takeaway

Climate transition scenarios aren’t just scientific models. They’re financial ones and they’re about to define how venture capital allocates risk and opportunity.

Every founder should know which future they’re building for.
Every VC should know which one they’re investing in.

Because in venture, you can’t control the climate, but you can choose the scenario you’re prepared to survive in.

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At Planicorn

We help funds and founders integrate scenario thinking into their strategy connecting regulatory frameworks, investor expectations, and operational resilience into one clear picture. Because readiness isn’t about predicting the future. It’s about surviving every version of it.