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The Criticality of Country-Specific Scenarios to Inform Transition Risk Assessment for the Financial Sector
A Case Study for India
Kopal Dhandhania, Aman Malik, Rishabh Varma, Vaibhav Chaturvedi
August 2026 | Low-carbon Economy
Suggested Citation — Dhandhania, K., Malik, A., Varma, R., & Chaturvedi, V. (2026). The criticality of country-specific scenarios to inform transition risk assessment for the financial sector: A case study for India. Energy and Climate Change, 100255.
Overview
Most financial institutions rely on global scenario frameworks such as those from the Network for Greening the Financial System (NGFS) to assess climate-related transition risks. Using India as a case study, this paper argues that while NGFS scenarios offer a standardised framework with accessible results and documentation, they need refinement for national financial systems, which require more granularity and region-specific detail.
We compare key socio-economic drivers and energy-system transition variables across NGFS Phase V scenarios and India-specific net-zero studies. Across 58 transition indicators from 2020 to 2040, NGFS outcomes aligned with only 48% of the range reported in Indian studies. This suggests NGFS scenarios may misestimate the timing and scale of India's sectoral transformation, and the resulting financial risk exposure. While our findings are specific to India, they raise questions worth investigating elsewhere.
Key Findings
- NGFS scenarios project lower near-term economic growth for India than national studies: NGFS scenarios assume GDP growth rates of 5.9–6.6% per annum for 2020–2030, compared to 6.4–7.1% in India-specific studies. As a result, projected per capita income in Indian studies is up to 35% higher by 2040 compared to NGFS projections, with significant downstream implications for energy demand and sectoral transformation.
- Base-year energy data diverges significantly between NGFS and Indian sources: For total final energy, NGFS values are approximately 25–35% higher than those in Indian studies for the year 2020. This discrepancy is even more pronounced for final energy-coal (25–75% higher in NGFS). Misaligned starting points make it harder to interpret differences in future projections and can skew transition risk assessments for India's financial sector.
- NGFS scenarios project a faster coal phase-down than is realistic for India: NGFS scenarios indicate coal peaking by 2025–2030 and a rapid subsequent decline, with faster additions of solar, wind, and nuclear energy. In reality, coal accounted for 74% of India's power generation in 2025, and a phase-down of this scale faces significant political, socio-economic, and energy security constraints.
- NGFS and Indian studies are broadly misaligned across key transition indicators: Out of 58 sub-indicators examined across primary energy, electricity generation, final energy, capacity, and emissions, NGFS scenarios aligned with only 28 (48%) of the range reported in Indian studies. Alignment is particularly weak for granular variables, even when compared against Indian studies with ambitious 2050 net-zero targets.
- National models capture India's development priorities more accurately: Indian studies incorporate country-specific policies such as the PMUY scheme for LPG access, the UJALA LED programme, national biofuel blending targets, and the Viksit Bharat ("Developed India") 2047 vision. These nuances are critical for realistic transition risk assessment and are difficult to represent at the resolution of global models.
"Transition risk could hit India's financial system sooner than we realise. It is critical to inform key decision makers through scenario modelling to better prepare the financial system for any potential shocks. The process initiated by the RBI is critical in this regard."
