Model Catalog
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combined
CE Stress Fragility Overlay
Combined
Current
active
Combined model emphasizing downside pressure and weak resilience under fragmented transitions.
Horizon 2025–2045
Geography Global (sector-level stress)
Resolution Industry-sector with fragility-weighted company calibration
Projection years 2025, 2027, 2030, 2033, 2036, 2040, 2045
Stranded asset risk
Policy fragmentation
Cross-sector contagion
Regulatory shock compression
Insurance retreat risk
Delayed-action shock
Compounding physical + transition stress
Methodology
The CE Stress Fragility Overlay is designed for downside scenario analysis — it amplifies transmission from policy fragmentation and physical risk accumulation into combined sector pressure. Component weights are tilted toward climate and transmission (away from economics) to reflect scenarios where regulatory incoherence and physical impacts dominate over macro stabilisers. The model is calibrated against the NGFS 'Current Policies' and 'Below 2°C delayed action' stress scenarios and the FSB's severe climate scenario for financial stability analysis. Company-level fragility indicators (net zero commitment credibility, stranded asset exposure, regulatory compliance cost) are used to stress the sector signals above their balanced-model levels.
Key Mechanisms
- Downside amplification: stress weights are tilted toward climate (physical + transition) and transmission, reducing the stabilising influence of economic fundamentals
- Policy fragmentation penalty: the divergence between coordinated and fragmented policy regimes is amplified, creating larger downside spreads
- Stranded asset scenario: companies with long fossil asset lives (Aramco, ExxonMobil) face acute write-down risk under delayed-then-sudden policy catch-up
- Regulatory shock compression: compressed transition timelines (delayed action forcing rapid catch-up) create larger concentrated losses than orderly transition
- Cross-sector contagion: transmission channels are weighted more heavily, allowing physical and financial stress to propagate across sectors
Best For
stress scenarios where policy fragmentation and sector fragility dominate outcomes
Strengths
- Explicitly designed for tail risk scenarios — provides the downside boundary condition for portfolio stress testing
- Captures the 'delayed action shock' dynamic: regulatory catch-up is more disruptive than steady-state transition and this model quantifies the difference
- Cross-sector contagion: elevated transmission weights allow the model to capture how a stress in one sector (insurance retreat) propagates to another (real estate)
Limitations
- Not appropriate as a base case — the elevated stress weights systematically overstate pressure under orderly transition conditions
- Reduced economic weight means macro stabilisers (monetary easing, fiscal support) are underweighted relative to their historical effectiveness
- Confidence index is structurally lower than balanced model — reflects genuine uncertainty but may overstate noise in high-confidence scenarios
Industry Signal Dashboard
— projected signals from this model across all tracked industries
Combined Signal Overview by Industry
Economic and climate signals together — growth rate (%) and physical hazard index (0–1) per industry.
Inflation + Transition Pressure
Inflation rate (%) and transition pressure index side-by-side per industry.
Hazard vs Resilience
Physical hazard exposure vs adaptive resilience — industries above the diagonal face net vulnerability.
Industry Context
Energy
The stress overlay amplifies stranded-asset risk for energy by increasing the climate component weight. Under delayed/fragmented scenarios, the most probable outcome is sudden policy catch-up — a rapid carbon price ratchet that inflicts larger concentrated losses than orderly transition. Aramco and ExxonMobil's long fossil asset lives are the primary vulnerability: their production assets are most exposed to stranding under compressed transition timelines.
Agriculture
The stress overlay applies maximum climate weight (0.55) to agriculture. Under fragmented policy, the absence of functioning carbon markets for agriculture means transition costs accumulate without offsetting revenue — a direct fragility for JBS and Tyson, which lack interim 2030 decarbonisation targets. Physical hazard compounding (consecutive drought years) without adaptation finance creates the highest sector fragility scenario.
Manufacturing
The stress overlay elevates the transmission component for manufacturing, capturing how supply chain fragility and trade tariff escalation compound basic economic and climate signals. In a fragmented policy environment, ArcelorMittal faces simultaneous competitive disadvantage from CBAM in EU while lacking carbon pricing support outside EU — creating stranded investment risk in green steel capacity built ahead of policy credibility.
Transport
Transport is a high-fragility sector in the stress overlay because fragmented policy means IMO levies, EV mandates, and aviation SAF obligations all hit simultaneously without adequate transition finance. The fleet replacement risk is acute: Maersk's methanol fleet investment creates stranded asset risk if fuel infrastructure doesn't materialise; Delta's SAF supply chain is vulnerable to policy reversal.
Insurance
The stress overlay projects maximum insurance sector fragility: major reinsurers retreating from coastal and wildfire markets, creating an insurance protection gap that becomes a fiscal liability. The combined pressure signal for insurance under stress reflects both direct nat-cat loss escalation (Swiss Re's $450bn/year 2040 projection) and the systemic risk of uninsured losses cascading into banking NPLs.
Real Estate
Real estate receives the highest combined pressure index in the stress overlay. The fragility scenario posits a simultaneous rate shock, physical loss event (flooding), and insurance market retreat — a compound stress event already occurring in parts of Florida, California, and coastal Europe. Vonovia's rate exposure, British Land's MEES compliance cliff, and Prologis's coastal flood exposure are the three concurrent fragility triggers the model calibrates.