Deep Dive: Top 10 GARP SCR Case Studies You Can’t Miss
- Kateryna Myrko
- Jul 29
- 5 min read
In the rapidly evolving landscape of sustainability and climate risk management, practitioners must not only understand theoretical frameworks but also be adept at applying them to tangible, real‑world situations. The GARP Sustainability & Climate Risk (SCR) exam tests this very capability through case‑study questions that mirror challenges faced by financial institutions, corporations, and policymakers. This article explores ten critical case studies—organized into four thematic categories—that exemplify the complexities of physical risk, transition risk, governance failures, and integrative risk modeling. By studying these examples, you will sharpen your analytical skills, deepen your command of quantitative techniques, and build the confidence needed to navigate the SCR’s case‑based exam format.
Case Study 1–3: Physical Risk in Action GARP SCR Case Studies
Coastal Flooding & Insurance Portfolios
Coastal regions are on the front lines of sea‑level rise, with insurers grappling with escalating claims and eroding profit margins. In one landmark example, a major Australian underwriter deployed probabilistic flood‑damage functions to simulate losses under varying sea‑level‑rise scenarios through 2050. By overlaying high‑resolution topographic maps with storm‑surge and precipitation projections, the insurer identified hotspots where claim frequency could increase by more than 40 percent. The model’s output drove a recalibration of loss‑given‑default ratios and the establishment of dynamic capital buffers that adjust annually based on updated climate data. Studying this case equips you to decode how physical‑risk metrics are integrated into solvency assessments and disclosure narratives.
Supply‑Chain Disruptions
Beyond direct asset damage, climate shocks ripple through global supply chains. A multinational apparel company conducted a three‑tier hazard mapping exercise: first, pinpointing supplier facilities in flood and heat‑stress zones; second, quantifying first‑tier production losses; and third, extrapolating impacts on second‑ and third‑tier suppliers. The resulting analysis estimated US $120 billion in potential revenue shortfalls over five years. Armed with these insights, procurement teams diversified their supplier base, negotiated force‑majeure clauses, and invested in climate‑resilient infrastructure at key nodes. This study highlights the importance of translating geospatial climate data into financial risk metrics—a skill vital for the SCR exam’s physical‑risk scenarios.
Wildfire Risk & Mortgage Portfolios
In the western United States, rising wildfire frequency and intensity threaten both homeowners and mortgage holders. One leading lender used remote‑sensing data and fire‑behavior models to project property‑level damage probabilities over the next two decades. The lender then conducted a portfolio‑wide stress test, calculating incremental changes in expected credit‑loss rates and mortgage‑insurance claims. Results showed that properties within 5 kilometers of high‑risk fire zones could see default rates rise by up to 25 percent under extreme‑fire conditions. In response, the bank adjusted its underwriting guidelines to require enhanced fire‑mitigation measures or higher insurance coverage. This case reinforces how climate‑driven hazard assessments inform credit‑risk management and regulatory reporting.GARP SCR Case Studies
Case Study 4–6: Transition Risk Scenarios
Carbon Pricing Impacts on Utilities
Imposing a carbon cost—such as US $50 per ton of CO₂—can dramatically alter a utility’s profitability. In one case, power generators across emerging markets re‑ran discounted cash‑flow models under a carbon‑pricing scenario. They found coal‑fired plants would face a 12–18 percent drop in operating margins, while gas and renewables became comparatively attractive. Utilities responded by accelerating capital expenditure shifts toward lower‑carbon assets and incorporating carbon‑cost hedges into their treasury operations. Mastering this case helps you understand how forward‑looking policy variables are embedded in valuation models and scenario analyses for transition‑risk management.
Stranded‑Asset Examples
Rapid technological change and policy shifts can leave companies exposed to stranded assets—investments that have lost economic value ahead of the end of their useful life. A prominent study in the palm‑oil sector demonstrated how Indonesia’s anti‑deforestation regulations rendered plantations worth up to US $2 billion unviable. Plantation owners faced immediate impairment charges, triggering credit‑rating downgrades and refinancing challenges. Risk managers incorporated “policy‑shock” triggers into asset‑valuation algorithms, enabling more proactive impairment provisioning. This example teaches that effective transition‑risk analysis requires not only scenario modeling but also the identification of regulatory tipping points that drive valuation shocks.
Automotive Industry & Electrification
As electric‑vehicle adoption accelerates, traditional automakers face the risk of unsold internal‑combustion‑engine (ICE) inventory and obsolete manufacturing lines. One global manufacturer employed fleet‑transition models that forecast EV market share growth under varied subsidy and oil‑price scenarios. The firm then stress‑tested its capital plans, evaluating the net‑present‑value impact of retrofitting assembly plants versus mothballing them. Results guided a phased investment in battery‑production capacity and the redeployment of labor forces. For SCR examinees, this case exemplifies how to incorporate market‑adoption curves, technology‑cost declines, and policy incentives into transition‑risk frameworks.
Case Study 7–8: Governance Failures
Board Oversight Gone Wrong
Robust climate governance starts at the top, yet many boards lack the expertise or structures to manage climate risk effectively. In one high‑profile failure, a major energy company’s board neglected to incorporate climate‑scenario analysis into its strategic planning, leaving the firm blindsided by abrupt policy changes that slashed projected cash flows. The board’s absence of a dedicated climate committee and lack of climate‑literate directors resulted in delayed risk escalation and no contingency planning. This governance lapse led to shareholder lawsuits and a sharp stock‑price decline. The case underscores the SCR exam’s focus on evaluating board charters, committee mandates, and oversight mechanisms under the “Governance” pillar of IFRS S2.
Risk Reporting Breakdowns
Accurate risk reporting hinges on seamless data flows and alignment with disclosure standards. A leading European bank self‑certified 50 percent of its assets as “green” under an internal taxonomy, only to have regulators later reclassify that figure as 1 percent under the EU taxonomy. The discrepancy stemmed from inconsistent criteria across business units and the absence of a centralized data‑governance framework. Simultaneously, critical data gaps—such as missing geopositional tags for commercial properties—impeded credible stress‑testing. This episode teaches SCR candidates how to probe data‑validation processes, taxonomy‑alignment procedures, and the reconciliation of internal and external reporting metrics.
Case Study 9–10: Integrative Risk Models
Scenario Stress Tests in Banking
Climate stress‑testing in banking combines physical and transition scenarios over multiple horizons. One case study issued by the FS‑UNEP Centre guided banks through applying both 2 °C and 4 °C world scenarios to credit‑portfolio loss projections over a 10‑year period. Institutions categorized exposures by sector and geography, then recalculated expected default frequencies and loss‑given‑default rates under each scenario. The NGFS guide further refines this by recommending targeted stress tests on material portfolios only, thus balancing analytical depth with feasibility. Understanding this integrated approach is essential for SCR candidates to demonstrate proficiency in translating scenario outputs into capital‑planning adjustments.
Portfolio Re‑balancing for Net‑Zero
Achieving net‑zero alignment without foregoing diversification benefits requires sophisticated optimization. A Danish pension fund, PenSam, implemented a multi‑stage rebalancing strategy: it first screened holdings for carbon intensity, then applied mean‑variance optimization constrained by decarbonization targets at each rebalancing window. Complementing this, the fund used hazard‑weighted ESG scores—reflecting both physical and transition risks—to adjust asset weights dynamically. The outcome was a portfolio that reduced its carbon footprint by 50 percent within three years while maintaining a Sharpe ratio comparable to its benchmark. For the SCR exam, mastery of such optimization techniques and risk‑scoring frameworks is critical when tackling integrative risk‑modeling questions.
The GARP SCR exam challenges candidates to bridge academic theory and industry practice by analyzing complex, data‑rich case studies. The ten examples outlined here—spanning physical hazards like coastal flooding and wildfires, transition risks from carbon pricing and electrification, governance lapses that undermine oversight, and integrative stress‑testing and portfolio optimization techniques—provide a blueprint for the types of scenarios you will encounter. Focus on the underlying methodologies: probabilistic hazard modeling, multi‑tier supply‑chain mapping, discounted cash‑flow adjustments for transition costs, governance‑framework evaluations, and constrained optimization algorithms. By internalizing these cases, honing your quantitative toolkit, and practicing structured, exam‑style responses, you will be well‑prepared to demonstrate the analytical rigor and practical judgment essential for success on the SCR exam.
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