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 technology & AI companies?
Our scenario analysis highlights several critical impacts of the transition to net zero across digital infrastructure, energy systems, resource use, supply chains and consumer outcomes. These evolve over time and present both challenges and opportunities for organisations operating across technology, AI, cloud services, digital infrastructure and data-intensive business models.
Key risks
- infrastructure and energy constraints: Growth in AI and digital services increases demand for data centre capacity, but electrical grid constraints and insufficient transmission infrastructure can limit expansion and reduce processing capacity available for AI-enabled services and digital innovation.
- consumer pushback: As AI becomes more embedded in everyday products and services, consumers may increasingly question whether the benefits justify the environmental and ethical trade-offs. Concerns around data centre energy and water use, privacy, bias, transparency and job impacts could slow adoption where organisations fail to show clear value, responsible governance and credible impact management.
- climate-related disruption: Storms, heatwaves and wider infrastructure vulnerability increase the risk of outages affecting digital connectivity, cloud services and critical technology infrastructure, undermining reliability and resilience.
- water scarcity pressures: Large-scale data centres create significant cooling requirements in some locations. Competition for water resources and increasing water stress may constrain future development and increase operating costs.
- supply chain and reputational exposure: The growing demand for semiconductors, critical minerals and digital infrastructure components increases exposure to environmental and social risks within global supply chains, creating both operational and reputational challenges.
Opportunities
- AI-enabled climate solutions: AI applications supporting climate adaptation, energy management, healthcare and mobility create opportunities for technology providers to support decarbonisation across the wider economy while opening new markets and revenue streams.
- investment in digital resilience: Organisations that invest early in resilient digital infrastructure, cyber security, low-carbon data centres and renewable-powered services are likely to benefit from increasing demand for trusted and sustainable technology solutions, as well as resilience from energy price spikes and lower total cost of ownership for assets.
Key risks
- tension between AI growth and climate ambitions: As AI adoption accelerates, energy demand from data centres and digital services increases significantly. Without sufficient renewable generation and transmission upgrades, organisations face growing pressure to balance growth ambitions with climate commitments.
- data centre location constraints: Water availability, grid capacity and planning restrictions increasingly influence where digital infrastructure can be developed, limiting flexibility and potentially increasing regional inequalities in digital capacity.
- consumer trust and cyber risks: Greater reliance on digital services, AI and connected infrastructure increases exposure to cyber security incidents, operational disruption and loss of public trust if system resilience and protection is not maintained and consistently improved in line with best practice.
- resource dependency: Continued expansion of AI, cloud computing and advanced technologies increases demand for critical minerals and specialised components, intensifying supply chain competition and scrutiny on the social and environmental impact of extracting and processing those resources.
Opportunities
- low-carbon digital infrastructure: Continued global expansion of renewable electricity generation and grid decarbonisation creates favourable conditions for commercially viable sustainable AI deployment and wider green digital transformation.
- advanced resource management: Growth in circular economy approaches, improved environmental management and more responsible sourcing creates opportunities to reduce supply chain risk and demonstrate leadership in sustainable technology development, utilising technology such as block chain to provide granular, reliable tracing of materials through supply chains.
- expansion of AI applications: Continued deployment of AI across sectors such as healthcare, mobility, infrastructure and climate adaptation strengthens the strategic role of technology businesses in enabling an effective transition.
Key risks
- infrastructure resilience risk: As economies become increasingly dependent on digital systems, failures in energy, water or data infrastructure create systemic risks affecting organisations, consumers and wider economic activity. Liability for this disruption is likely to fall on technology providers, increasing overheads and insurance premiums.
- digital exclusion: Increased reliance on AI-enabled services may exclude vulnerable or digitally disadvantaged groups if accessibility and inclusion are not embedded into service design and delivery. Organisations that fail to embed accessibility, inclusion and human-centred design into products and services risk reputational damage, reduced customer trust and increased regulatory scrutiny.
- persistent supply chain scrutiny: Expectations regarding environmental impacts, resource use and labour practices across global technology supply chains continue to intensify, increasing legal, reputational and commercial exposure.
Long‑term opportunities
- Data centre expansion enabled by clean energy: In a 1.5°C aligned pathway, renewable generation and transmission investment keep pace with demand, supporting large-scale deployment of AI, cloud computing and advanced digital services.
- Climate-resilient digital ecosystems: Improved infrastructure resilience, robust cyber security and reliable connectivity strengthen confidence in digital services and support sustainable economic growth.
- Technology-enabled societal benefits: Mature AI solutions support healthcare, mobility, infrastructure management and resource efficiency, helping organisations create wider social value while improving competitiveness.
How risks and opportunities vary across the three climate scenarios
Supply chain vulnerabilities and environmental impacts create operational and reputational risks.
Polarised governance requirements across territories increase uncertainty and compliance burden, causing higher overhead costs.
Greater emphasis placed on resilient and responsible sourcing supports expanding digital infrastructure, reducing risk of supply chain shocks.
Governance ambitions remain fractured but increased alignment enables more holistic compliance approach.
Robust supply chains and stronger environmental management support sustainable industry growth and investor confidence.
Aligned regulatory environment enables long term certainty and more efficient compliance.
Public concern around AI accelerates as energy demand, water use, data centre expansion and critical mineral sourcing become increasingly visible.
Trust in AI-enabled services remains fragile and adoption is uneven, particularly where organisations cannot clearly demonstrate tangible benefits or address concerns around privacy, transparency and workforce impacts
Consumers increasingly expect organisations to demonstrate responsible AI governance, transparency and measurable societal value alongside innovation.
Environmental and ethical concerns do not significantly slow adoption, but they create greater regulatory pressure, investor scrutiny and competitive differentiation between trusted and less trusted providers.
Digital infrastructure, cyber security and inclusive design support broader access to technology benefits across society.
AI applications strengthen outcomes in healthcare, mobility and other critical services.
What this means for technology & AI leaders
Transition risk has significant implications for digital infrastructure strategy, AI deployment, energy procurement, operational resilience and supply chain management across the technology sector. The pace of digitalisation increasingly depends on the availability of energy, resilient infrastructure and access to critical resources. At the same time, growing scrutiny of AI, cyber security and social inclusion means that despite the focus on growing market share, organisations must balance growth ambitions with wider environmental and societal expectations.
For technology and AI leaders, the challenge is no longer simply whether AI can be deployed at scale, but whether it can be deployed in a way that customers, regulators, investors and communities are willing to support. Access to low-carbon energy, water availability, digital infrastructure resilience and responsible supply chains are becoming increasingly important determinants of growth. Equally, public trust is emerging as a critical business asset. Organisations that cannot clearly demonstrate the value of AI, while addressing concerns around privacy, transparency, workforce impacts and environmental footprint, may find adoption slows despite strong underlying demand.
Scenario analysis provides a practical way to test these future challenges before they materialise. It can help organisations:
- understand where energy, water and infrastructure constraints could limit future growth and innovation
- identify vulnerabilities within digital infrastructure, supply chains and critical resource dependencies
- assess how changing stakeholder expectations, regulation and consumer trust could affect adoption of AI-enabled products and services
- build more resilient, transparent and trusted approaches to AI deployment
- identify opportunities linked to digital resilience, climate adaptation and technology-enabled decarbonisation
The technology organisations most likely to succeed will be those that recognise trust and resilience as competitive advantages, not compliance obligations. As AI becomes increasingly central to economic activity, market leadership will be shaped not only by technical capability, but also by an organisation's ability to secure the energy, infrastructure, resources and public confidence needed to scale responsibly. Those that can demonstrate clear societal value, strong governance and responsible innovation will be better positioned to attract customers, investment and long-term growth.