Published: 5 August 2026
Author: Max Finney
What is climate scenario modelling – and why use it?
Climate scenario modelling is about making better decisions in uncertainty. It helps organisations understand how different policy, market and technology pathways could shape their operations and long‑term strategy. Instead of betting on a single forecast, it tests a range of credible futures—so leadership teams can challenge assumptions, pressure‑test investments and strengthen resilience where it matters most.
This matters because expectations have shifted. Regulators increasingly require organisations to assess and disclose climate‑related risk. But this goes beyond compliance. Investors, regulators and wider society want clear evidence that organisations understand their exposure and are actively building more resilient businesses and supply chains in response.
Our scenario analysis draws on work undertaken by external consultants as part of Shoosmiths’ Transition Risk Assessment and uses the European Sustainability Reporting Standards (ESRS) impacts, risks and opportunities (IRO) framework to identify the sustainability themes most relevant to our key client sectors. The high priority themes were then tested against three future climate pathways from the Climate Change Committee (CCC), reflecting different levels of policy intervention, behavioural change and progress towards net zero.
For each sector, the analysis considered how risks and opportunities could evolve under each scenario, examining implications across areas such as regulation, markets, technology, investment, operations and reputation. This helps to ensure the analysis reflects the sustainability issues most likely to shape future business performance, stakeholder expectations and legal demand. We are therefore able to use the results to turn abstract risk into practical insight that mobility, logistics and manufacturing leaders can act on.
1. Business as Usual (BAU)
No major policy changes beyond current commitments. This represents the slowest pace of decarbonisation and the highest level of sustained climate risk.
2. Moderate Ambition
Some policy progress, but behaviour change and infrastructure deployment lag behind net zero pathways.
3. 1.5°C Aligned (Balanced Pathway)
Policy and behaviour change keep pace with net zero goals. This scenario delivers the most resilient and lowest‑carbon future.
What are the material transition risks and opportunities for energy & infrastructure?
Our scenario analysis highlights several critical impacts of the transition to net zero across markets, technology, policy and consumer dynamics. These evolve over time and present both challenges and opportunities.
Key risks
- energy price volatility and fossil fuel dependency: Electricity prices remain closely linked to global oil and gas markets, increasing uncertainty for project economics and route to market decisions
- grid constraints and connection delays: Limited network capacity slows the deployment of renewable and hybrid energy projects and restricts growth in energy-intensive infrastructure such as data centres
- policy and route to market uncertainty: Evolving UK policy frameworks create complexity for PPAs, pricing models and long-term revenue certainty
- water stress and system competition: Competing demand between power generation, hydrogen production and data centres places pressure on water infrastructure and planning decisions
- supply chain disruption and critical minerals pressure: Early-stage electrification drives demand for critical materials, increasing cost volatility and delivery risk
Opportunities
- scaling hybrid clean energy development: Integrated generation, storage and flexible assets improve resilience and commercial performance
- expansion of PPAs and structured revenue models: Growing demand for long-term power agreements creates opportunities for innovation in route to market
- increased infrastructure investment activity: Strong capital flows into clean energy and infrastructure support project development and pipeline growth
Key risks
- misaligned energy system investment: Continued reliance on fossil fuel infrastructure slows the benefits of renewable deployment and increases transition cost
- network capacity and electrification constraints: Demand from transport, buildings and industry places sustained pressure on grid infrastructure
- technology uncertainty across transition pathways: Competing roles for hydrogen, carbon capture and electrification create complexity for long-term investment decisions
- rising capital costs and financing complexity: Projects become more capital intensive, requiring more sophisticated funding structures and increasing execution risk
Opportunities
- expansion of E&I finance capability: More complex financing structures, including debt and blended capital, support growth in advisory and execution
- heavy transport decarbonisation: Regulatory pressure on HGV emissions drives investment in electrification and alternative fuels
- integrated infrastructure systems: Linking energy, transport and digital infrastructure creates more resilient and scalable project models.
Key risks
- stranded assets in legacy infrastructure: Failure to transition away from fossil fuel assets creates long-term financial exposure
- systemic infrastructure vulnerability: Underinvestment in integrated systems reduces resilience to climate and market shocks
- resource constraints across water and materials: Persistent competition for key resources limits system performance and expansion
Long‑term opportunities
- decarbonised and stable energy systems: Reduced reliance on fossil fuels delivers more predictable long-term pricing
- leadership in next generation energy and infrastructure: Developers and investors aligned to net zero pathways are best placed to capture long-term market value
- fully integrated infrastructure networks: Coordinated investment across energy, water, transport and digital systems improves resilience and efficiency
How risks and opportunities vary across the three climate scenarios
Electricity prices remain exposed to global oil and gas markets due to continued fossil fuel reliance and slower electrification of the system.
Developers, investors and energy-intensive users such as data centres face sustained cost volatility and reduced confidence in long-term PPA pricing structures.
Partial grid decarbonisation reduces some exposure to fossil fuels, but continued reliance on gas keeps prices elevated and uneven across regions.
Hybrid energy developers and investors must manage inconsistent economics across assets and geographies.
A fully decarbonised electricity system decouples pricing from fossil fuel markets and improves long-term price stability.
Clean energy developers, infrastructure investors and large energy users benefit from predictable costs and scalable low carbon power supply.
Limited investment in transmission and distribution infrastructure constrains capacity and delays the connection of new energy assets.
Grid bottlenecks restrict delivery of renewable projects, hydrogen developments and data centre expansion.
Targeted infrastructure upgrades improve capacity in some locations but fail to keep pace with system-wide electrification.
Developers must navigate regional constraints and increased competition for network access.
Coordinated investment in energy networks enables large-scale integration of renewables, storage and electrified demand.
Developers, infrastructure providers and digital operators benefit from reliable, high-capacity systems that support growth across sectors.
Uncertainty in policy frameworks and pricing mechanisms reduces the availability and effectiveness of long-term PPAs and structured revenue models.
Clean energy developers face challenges securing bankable agreements and attracting capital.
Increasing policy clarity supports growth in structured PPAs, but variations in implementation create uneven market access.
Developers and investors must tailor route to market strategies across different regions and project types.
Mature and transparent route to market mechanisms support long-term contracting and efficient pricing.
Developers, financiers and corporate offtakers benefit from stable revenue models and increased liquidity in energy markets.
Slower policy progress and infrastructure constraints reduce investor confidence and delay capital deployment into clean energy and infrastructure projects.
Financing activity remains selective, limiting growth in hybrid energy, heavy transport and emerging technologies.
Capital is deployed more actively, but investment remains focused on lower-risk or established assets due to persistent uncertainty.
Growth in E&I finance increases, but more complex projects still face constraints in securing funding.
Strong policy alignment and clear transition pathways unlock significant capital flows into clean energy and infrastructure systems.
Investors, lenders and developers are able to scale financing across renewables, transport electrification and integrated infrastructure projects.
Demand for critical minerals and water resources increases rapidly without coordinated management, leading to supply constraints and cost pressures.
Developers and infrastructure operators face delays, increased procurement risk and location constraints for projects such as hydrogen and data centres.
Improved resource management reduces some constraints, but supply chains remain under pressure from electrification demand and competing uses.
Developers and operators must actively manage sourcing strategies and project design to mitigate risk.
Circular economy approaches and diversified supply chains reduce dependence on primary materials and improve resource efficiency.
Energy and infrastructure projects are delivered with greater resilience, supported by more stable supply chains and reduced exposure to resource volatility.
What this means for energy & infrastructure leaders
Climate transition risk has deep implications for capital allocation, project delivery, system resilience and commercial models across energy and infrastructure. For developers, investors and advisers, scenario analysis is becoming more than a reporting exercise, it is a strategic tool to understand how different pathways will shape asset performance and market opportunity over time.
Within energy and infrastructure, transition risk is increasingly shaped by the interaction between policy ambition and delivery capability. Even where direction is clear, delays in grid investment, supply chain capacity and planning frameworks can materially affect outcomes for projects and portfolios. As a result, there is growing scrutiny on the credibility of delivery pathways, not just the ambition of targets.
Organisations can use scenario analysis for a host of reasons including, but not limited to:
- test the resilience of revenue models, including PPAs and route to market strategies, under different pricing and policy conditions
- inform investment and financing decisions across a more complex and capital-intensive pipeline of clean energy and infrastructure assets
- position for opportunities in emerging markets such as hybrid energy systems, transport decarbonisation and integrated infrastructure
Given this, scenario analysis provides a practical way to navigate uncertainty. By exploring how energy systems, infrastructure investment and resource constraints evolve across different pathways, organisations can better understand the trade-offs between cost, resilience and growth. This supports more informed decisions on where to deploy capital, how to structure projects and how to build systems that remain viable as the transition accelerates.