Chapter 3. Climate change risk Flashcards
Climate risk is related to
Financial risks linked to climate change
How can physical climate risk be caused?
Physical climate risk can be caused by the physical effects and changing weather patterns that result from climate change.
How can transition climate risk be caused?
Transition climate risk can be caused by efforts to reduce and eliminate the greenhouse gas emissions that cause it
IPCC stands for
Intergovernmental Panel on Climate Change
UNFCCC stands for
United Nations Framework Convention on Climate Change
Subtypes of transition climate risk
Policy and Legal
Technology
Market
Reputational
TCFD stands for
Taskforce on Climate-Related Financial Disclosures
TCFD’s key disclosure parameters
- Metrics and targets.
The metrics used by the firm in question to assess climate-related risks and opportunities - Risk management.
Processes the firm has in place to manage climate risks. - Strategy.
The Firm’s strategy surrounding climate change - Governance.
The Firm’s Governance structures to address and take responsibility for climate issues, including at the board level.
What are stranded assets?
Assets that have “suffered from unanticipated or premature write-downs, devaluations or conversion to liabilities.”
From a physical risk perspective, hazards are subdivided in
Acute and Chronic
The chronic climate hazard includes gradual, long-term trends, like…
- Average temperature rise
- Sea level rise
- Changing precipitation patterns
The acute climate hazard includes weather-related or weather-exacerbated events whose incidence increases with climate change, such as…
- Storms and hurricanes
- Droughts
- Heatwaves
- Precipitation extremes and floods
- Wildfires
Which is the TCFD disclosure recommendation on Governance?
Disclose the organization’s governance around climate-related risks and opportunities.
Which is the TCFD disclosure recommendation on Strategy?
Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.
Which is the TCFD disclosure recommendation on Risk Management?
Disclose how the organization identifies, assesses, and manages climate-related risks.
Which is the TCFD disclosure recommendation on Metrics and Targets?
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.
Which are the TCFD supporting recommended disclosures on Governance?
a) Describe the board’s oversight of climate-related risks and opportunities.
b) Describe management’s role in assessing and managing climate-related risks and opportunities.
Which are the TCFD supporting recommended disclosures on Strategy?
a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.
b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.
c) Describe the resilience of the organization’s strategy, considering different climate-related scenarios, including a 2°C or lower scenario.
Which are the TCFD supporting recommended disclosures on Risk Management?
a) Describe the organization’s processes for identifying and assessing climate-related risks.
b) Describe the organization’s processes for managing climate-related risks.
c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.
Which are the TCFD supporting recommended disclosures on Metrics and Targets?
a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks.
c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.
