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Mitigating climate risks and seizing opportunities

Understanding potential physical and transitional changes driven by climate change is crucial to mitigating risks and seizing opportunities. In-depth scenario analyses are at the core of our operations.

We follow a strategic process that ensures success in a constantly evolving external environment. We update our corporate and business strategy plans annually to proactively drive transformation towards decarbonized future.

These plans are based on the continuous monitoring of trends, key indicators and topical analyses. We also conduct scenario planning and supplementary risk assessments as needed, especially in response to unexpected market shifts or developments in key corporate-level indicators.

Analyzing risks and opportunities is embedded in our strategy

Transitional risk and opportunity assessments are integral to our strategy. These assessments consider factors such as emissions trends, global population growth, energy use, consumer behavior, regulatory changes, land use, and energy production technologies.

We also monitor potential physical impacts related to climate change. To fully understand these dynamics, we take a long-term perspective and conduct comprehensive scenario analyses, which we revisit whenever critical assumptions or external conditions change.

From nature’s perspective, risks such as heavy rainfall, storms, and droughts are expected to be among the most severe globally. On the opportunity side, climate change may accelerate forest growth or increase water availability for local hydropower production, for instance.

Explore our climate scenarios

We have assessed the resilience of our businesses and functions to climate change impacts from both physical and transitional perspectives, using input from the scientific community.

We conducted a company-wide analysis of transition risks and opportunities for UPM’s businesses based on three International Energy Agency (IEA) scenarios:

New Policies Scenario (NPS)
Current Policies Scenario (CPS)
2 °C Scenario (2DS)

The Finnish Meteorological Institute (FMI) carried out a physical scenario analysis, focusing on our operations in Finland, Germany, Uruguay and China in 2019 and updated it in 2024.

In general, transition impacts dominate in low and medium emissions scenarios. UPM is well positioned thanks to its flexible business portfolio, which can adapt to risks and opportunities. In high-emissions scenarios, however, physical impacts prevail, posing serious consequences not only for UPM but also for surrounding ecosystems and societies.

Key transitional risks and opportunities for UPM involve competition, markets, customers, products, and regulation. For example, unpredictable regulation, subsidies, or EU policy-driven national legislation affecting the wood market could significantly impact financial performance. Conversely, there are opportunities in using wood, a renewable resource, as a fossil-free raw material in UPM’s products.

Understanding physical impacts of climate change

Physical climate impacts can also affect the availability and stability of wood supply. For the 2024 report, FMI used the latest global climate models (CMIP6) and scenarios:

SSP1-2.6 (low emissions)
SSP2-4.5 (medium emissions)
SSP5-8.5 (very high emissions)

The updated report also includes observed weather data from 1961 to 2023 from the regions covered in the study. The data shows a statistically significant rise in seasonal temperatures. Mean temperatures are expected to rise across all regions, though the extent varies. As the planet warms, hot extremes will become more frequent, increasing drought risks even when precipitation rises.

Winter precipitation is projected to increase in Finland, while summer precipitation may decline in Germany. All four regions are expected to experience more intense extreme precipitation events. The long-term severity of climate impacts will depend heavily on how effectively greenhouse gas emissions are reduced.

FMI’s climate reports are publicly available via the University of Helsinki’s open repository.

2019 report

2024 update