Key Takeaways

  • En-ROADS, an interactive global climate model, helps clarify how different climate policy levers interact across the energy and economic system to shape long-term outcomes.
  • The model reveals that no single policy lever (e.g., carbon pricing or renewables) is sufficient on its own. Meaningful progress requires a coordinated combination of multiple levers to overcome system-wide inertia.
  • For pension funds, En-ROADS provides a transparent, science-based tool to help educate stakeholders, build custom climate scenarios, assess transition and physical risks, and identify potential investment opportunities.

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Summary

Motivation: Pension funds increasingly face regulatory and fiduciary expectations to incorporate climate change considerations into their investment portfolios and risk management frameworks. However, climate outcomes are driven by complex, interdependent forces – ranging from energy mix to population trends – that cannot be effectively evaluated in isolation. En-ROADS, a global, science-based climate simulator, can help investors explore how different climate actions interact to shape long-term warming trajectories and climate impacts worldwide.

En-ROADS: Developed by Climate Interactive and MIT Sloan, En-ROADS is an open-source climate model available through a user-friendly online interface. The model integrates thousands of data points and equations related to factors such as population and GDP growth, energy supply and consumption, and technological change. It allows users to adjust sliders representing dozens of real-world policy or investment choices, like electrification and carbon pricing, and see the resulting impact on hundreds factors such as air quality or temperature. Updated monthly, En-ROADS focuses on global impacts of climate change and can be used to build custom, science-based scenarios.

Findings:

  • The model highlights systemic and non-obvious trade-offs, such as capital shifting between technologies, rebound effects where efficiency gains lead to increased overall energy demand, and carbon pricing producing unintended regional fuel shifts. Moving one lever can have several, unexpected consequences, which En-ROADS is able to capture.
  • Single-lever policies focused on areas such as renewables, carbon pricing or electrification produce modest and often minimal improvements on their own; meaningful progress requires combining multiple levers in a coordinated manner.
  • For example, electrification has limited impact unless grids are simultaneously decarbonized; electrifying transport or industry on carbon-dependent grids simply reassigns emissions rather than reducing them.
  • En-ROADS illustrates classic system-dynamics delays, where feedback loops, permitting timelines, supply-chain constraints, and slow asset retirement mean policy interventions can take decades to fully influence global temperature and climate outcomes.
  • Given 40% of global emissions comes from the built environment, improving energy efficiency of existing buildings and infrastructure is crucial in reducing negative climate impacts.

Use Cases for Pension Funds:

  • Capacity building: En-ROADS serves as an educational tool for stakeholders, including Board members, to understand global climate drivers and the impacts of portfolio decarbonization.
  • Climate Risk Analysis: The tool provides granular physical risk data (such as sea level rise and wildfire danger) at a 22×22 km resolution, enabling funds to model risks for specific investments.
  • Scenario Analysis: Unlike standard off-the-shelf models, En-ROADS allows users to adjust assumptions to create custom scenarios tailored to institution-specific questions. This transparency is essential for meeting growing regulatory requirements.
  • Opportunity Assessment: While not a financial forecasting tool, En-ROADS identifies which solutions meaningfully influence global factors, highlighting where future capital needs and investment opportunities are likely to emerge.