Short-term climate shocks drive sector divergence

Climate risks are increasingly a short-term concern, especially in the context of climate stress testing and risk assessments. Building on our earlier work on the macro impacts of NGFS short-term scenarios, most recently in our Q1 2026 Disasters and Policy Stagnation report, this note translates these into sector-level outcomes using Oxford Economics’ Global Industry Model, highlighting where the key areas of vulnerability and resilience lie.

What you will learn:

• Physical risk shocks in the Disasters and Policy Stagnation scenario drive near-term losses, with agriculture among the most exposed. Manufacturing also declines sharply, as widespread floods and droughts damage infrastructure and push up input costs.
• Within services, impacts diverge, with real estate and transport most exposed, while financial services and communications are more resilient due to less reliance on physical assets and in-person activity.
• Industrial impacts are highly uneven in the Sudden Wake-Up Call scenario. Fossil fuel–intensive sectors such as refining and mining see the largest declines, while investment is partially redirected towards green infrastructure, supporting construction and electrification-related activity such as battery manufacturing.