Climate Change Risk

Question 1

Describe how climate risk can translate to financial risk.

Answer 1

climate risk transmits into the economy through corporate and financial balance sheets and consumer spending patterns (leads to losses through asset valuations or loan defaults)

Question 2

Identify Task Force on Climate-related Financial Disclosure (TCFD) disclosure parameters and key recommendation features.

Answer 2

four thematic areas that represent core elements of how organizations operate: governance, strategy, risk management, and metrics and targets

Question 3

Differentiate between physical and transition risks.

Answer 3

physical - impacts from changing climate | transition - economic transformation to low carbon economy

Question 4

Understand how hazards/drivers, exposure, and vulnerability interact to manifest physical and transition risks, and provide examples of each.

Answer 4

hazards - change in weather related events, exposure - classic financial sense of assets in a vulnerable place or setting, vulnerability - concept linked to adaptation, resilience and preparedness

Question 5

Define stranded assets and discuss how different sectors may experience stranded asset risk.

Answer 5

assets that have been devalued or deems as liabilities

Question 6

Define and differentiate acute and chronic hazards. Provide examples.

Answer 6

acute: weather related events or exacerbated weather events (TC, droughts, heatwaves, wildfire, inc precip). chronic: gradual long-term tends (SLR, water stress, temp)

Question 7

Discuss uncertainty, variability, and accuracy in hazard model predictions (e.g., frequency, timeframes).

Answer 7

short timescales in the models give rough data

Question 8

Identify data challenges modeling direct physical risk. Understand the current state of climate hazard data availability and what issues asset owners must consider when interpreting climate risk data.

Question 9

Define and provide examples of indirect risks.

Answer 9

supply chain and liability risk, systematic or multifaceted

Question 10

Discuss how physical and transition risks can provide opportunities for companies and sectors.

Answer 10

government partnerships, company and community partners

Question 11

Identify the drivers of transition risk. Categorize transition risks (e.g., technology, market) and provide examples of each.

Question 12

Understand current industry trends for each transition risk category and strategies companies can use to reduce risk or manifest climate-related opportunities.

Question 13

Understand how physical and transition risks uniquely affect the real estate and electricity sectors.