Company: BCS
Filing Date: 2025-02-13
Form Type: 20-F
Source: 0000312069-25-000114
Chunk: 119

Company: BARCLAYS PLC
Filing Date: 2025-02-13
Form: 20-F
Chunk 119
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 as these policies are largely investment and funding which will spur on economic activity. More stringent government climate policies - the expansion of the Emissions Trading Scheme (ETS) and the rapid introduction of a Carbon Border Adjustment Mechanism (CBAM) - come into effect. This induces a carbon price shock and leads to a dampened recovery. Jump-off Year 1.5 Year 2.5 Stress Recovery Dampened recovery Stage 2: 1 As the economy moves past peak recession, large parts of it start to consider how it can build back greener. Under continued behavioural pressure from consumers and investors, large-scale plans for transitioning to a more sustainable business model occur where possible. The return of capital on these plans and the associated delay to recovery leads to a slight prolonging of the stress, but the creation of a transition plan leads to confidence in financial markets by investors. 2 Additional policies in the UK and US are accelerated or announced. For example, the government will rapidly increase the investment and deployment of EV charging infrastructure to support faster transition in the automotive sector. Stage 3: 1 The EU and UK governments ramp up their existing emissions trading schemes to achieve 1.5&deg;C, with a carbon price shock increasing $141/tCO2 within 12 months from 2027 and continuously increasing. This dampens economic recovery and leads to prolonged higher inflation as production costs are higher due to increased energy costs. However, to some extent, this is offset by both public and private investment to enable faster transition. 2 Introduction of Carbon Border Adjustment Mechanisms, resulting in supply-side shocks, a reduction in exports, and other trading frictions. The scenario will have significant impacts on Barclays, including: 1) Amplified market shocks: additional to existing macroeconomic shocks, there will be further equity and credit shocks for brown industries and financiers, as a result of immediate repricing. 2) Amplified credit deterioration: additional credit risk on brown industries as a result of lower earnings expectations and refinancing risks. 3) Increase in frequency of physical risk events: throughout the time horizon, there is an increase in the occurrence of physical hazards such as flood, hurricanes and droughts. Following the above narrative, scenario variables are provided with varying levels of granularity. For example, global variables &#8211; notably demand in climate-sensitive sectors such as Energy, Power and Automotive &#8211; national variables &#8211; including unemployment rates, GDP, HPI, CPI, government legislation on EPC with further distinction