Examining both ends of the climate-action spectrum, the report presents two climate-related scenarios set in the year 2050. Developed in partnership with KPMG, The Aotearoa Circle and its partners, the scenarios have been named ‘Mako’ and ‘Kahawai’, in honour of two fish species bearing cultural significance to the Maori people. It should be noted that the outcomes postulated in each scenario are less important that the process of defining and developing them, hence emphasis is placed on methodology and in providing guidance for organisations wishing to undertake scenario analysis as a means of improving climate preparedness.

In the two scenarios explored for the purpose of this exercise, the Mako scenario represents the aggressiveness and unpredictability (reflective of the Mako’s temperament) of climate change in a world set to exceed 4ºC of warming by 2100. Here, a failure to curb carbon emissions has meant New Zealand is navigating the physical and socioeconomic consequences of significant climate disruption. Some key features of the Mako scenario include:

• Accelerating temperatures around NZ lead to a 1ºC increase in air temperature and a 1.5ºC increase in sea surface temperature around NZ
• Ocean acidification evident with ocean pH at 7.94pH
• Sea level rise of 0.28m
• A 2% decline in dissolved O2 in the ocean around NZ
• A projected annual emissions footprint of 87.6Mt CO2 for the year 2050

In contrast, the Kahawai scenario details a world in which the dangers of catastrophic climate change have been averted through a global effort to cap global warming projections at 2ºC. Much like the Kahawai (an intelligent schooling fish), the strength of the collective is a defining feature of this scenario. Some key features of the Kahawai scenario include:

• Air temperature around NZ increases by 0.7ºC, and sea surface temperatures are capped at 0.8ºC
• Ocean acidification is not as severe, with the ocean pH around NZ sitting at 8.0
• Sea level rise of 0.23m
• Just a 1% decline in dissolved O2 in the ocean around NZ
• Significantly lower annual emissions projection at 13.1Mt CO2 for the year 2050

Combining the insights of the TCFD, the Climate Disclosure Standards Board (CDSB), the Sustainability Accounting Standards Board (SASB) and the principals and practices of ISO14090, the two scenarios were developed through KPMG’s a three-phase methodology:

• Assessment of risk factors
• Development of a risk model
• Identification and definition of scenario narratives

To further understand the climate related risks and enhance the power of the scenarios explored, KPMG employed an analytical “Risk Pathways” framework in combination with the scenario analysis. These risk pathways were specific to NZ fisheries and were categorised as: ‘physical risk’, ‘transition risk’, ‘legal risk’, and ‘capital risk’. Through this approach, the Aotearoa Foundation was able to build a narrative detailing the interaction between risk factors and environmental conditions unique to NZ fisheries in the context of each scenario.

1. These scenarios demonstrate how regardless of our trajectory, there will be risks and opportunities present for New Zealand's fisheries and aquaculture, in both a decarbonised or a catastrophically climate changed world. Either way, the impacts of rapid decarbonisation (and policy change) or rapid warming both require strategic responses from government, businesses and other stakeholders.
2. The next decade is crucial: If we haven’t taken decisive action in the next 10 years, feedbacks and tipping points in the climate system will choose a perilous path for us. This perilous path will see the emergence of new industries, technologies and innovations, as well as the collapse of old ones. Investors need to scan the horizon for new opportunities, and be wary of how a lack of climate preparedness may impact future value generation.
3. Climate-related risks can neither be understood or effectively addressed without considering their dynamic interaction with other risks. Avoid assessing risks in isolation, and instead consider the potential antagonistic or synergistic effects of co-existing risks.
4. Our social, political and economic institutions will need to pivot quickly and collaboratively to avoid the worst effects of climate change. Like New Zealand's COVID 19 response, the ‘Māko’ and ‘Kahawai’ scenarios similarly demonstrate how a proactive, flexible, and collaborative approach to mitigation and adaptation, could pay dividends.
   
5. The impact of climate change on natural and human systems will influence, and be influenced by, other risk factors old and new. Disruptive technologies and social attitudes, for instance, may drive comparably profound change. As such, climate-related risks can neither be understood or effectively addressed without considering their dynamic interaction with other risks.
6. Scenario analysis is a useful tool for understanding the scope and interconnectedness of climate-related risks impacting organisations under multiple global warming projections. Organisations that utilise it may be more responsive and adaptive to climate risks than those that don't. Keep this in mind when assessing the risk profile of potential investments.
7. Looking to the TCFD's for guidance, 'good' scenario analysis should be: plausible (narratives describe conceivable futures), coherent (constituent components are internally consistent), challenging (narratives should confront business as usual assumptions), and relevant to decision makers (enable strategists to test their intentions against the scenarios).
8. Ask yourself: based on your interpretation of the scenarios, what are the climate-related financial risks and opportunities facing your organisation? Consider your physical risks, transition risks, legal risks, and capital risks, in light of: the geographic location of your value chain (upstream and downstream), your assets and the nature of your operations the dynamics of your supply and demand markets, your customers and other key stakeholders.
9. Take a ‘whole systems' approach. Determine the implications of the risks and opportunities in both a climate active and business as usual scenario for your strategy, capital allocation, and costs and revenues, both at an enterprise-wide level, and for specific regions and markets.