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GARP SCR > Climate Risk > Flashcards

Climate Risk Flashcards

1
Q

Climate Risk results from

A

An interaction of hazards or driving factors with exposure and vulnerability

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2
Q

Stranded assets have suffered from…

A

Premature / unanticipated write-offs due to climate factors

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3
Q

Whilst broader climate / net zero discussions are driven through the UNFCCC, climate risk analysis is usually driven by…

A

Financial regulators and private sector institutions

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4
Q

When was TCFD formed and under whom

A

2015 under the aegis of the G20 Financial Stability Board

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5
Q

Understanding climate risks does not require certainty from a climate model, but does need…

A

A focus on understanding how physical climate hazards or drivers of economic low carbon transition affects firms and financial outcomes

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6
Q

TCFD Framework & Recommendations - final report issued ___?

A

2017

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7
Q

Categories of Risk TCFD breaks down into…

A

Physical - acute & chronic

Transition - market ; technology ; reputational ; policy & legal

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8
Q

Key TCFD parameters include:

A
  1. Metrics & Targets
  2. Risk Management
  3. Strategy
  4. Governance
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9
Q

What are the key features of the TCFD recommendations? They are intended to be…

A
  • adaptable by all organisations
  • included in financial filings
  • designed to be decision-useful, forward looking
  • strongly focused on risks & opportunities
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10
Q

Vulnerability refers to notions of…

A

Resilience

Flexibility

Adaptation

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11
Q

Vulnerability at facility level links to - - -

Vulnerability at corporate level links to - - -

A

Facility level refers to physical infrastructure

Corporate levels refers to lack of preparation for such issues

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12
Q

Stranded assets & unburnable carbon - what is the link

A

Unburnable carbon is FF reserves that cannot be fully exploited if 2*c goal is to be met. The FF reserves are stranded assets

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13
Q

Stranded assets are largely concentrated within the

A

High emitting sectors - primarily energy and industrial sectors

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14
Q

Provide examples of how physical risks can result in stranded assets

A

Lack of availability of fresh water
Disruption to supply chains
Sea level rise / coastal flooding

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15
Q

Current policies put the globe on for what *C of warming

A

3*c

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16
Q

Even with an average warming of 1.5*c compared to pre-industrial times…what will this mean for areas of the globe

A

Impacts will still be severe

Arctic winters will be on average 4.5*c warmer

More Med droughts

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17
Q

Comment on the ability of models to predict hazards

Give an example

A

Wide range in ability to predict the magnitude and freq. of specific hazards, or their specific locations

All models agree that precipitation patterns will change - they disagree on magnitude (& decrease or increase)

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18
Q

How does the IPCC show model agreement

A

Cross hatching to indicate where 2/3 of models agree

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19
Q

What type of accuracy do IPCC models provide?

A

Looks several decades ahead and provides fairly robust estimates for 2100

Limited information on next 1/2 decades and limited on smaller geographical scales

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20
Q

Climate hazards require information on the interaction between climate events & _____

Therefore models must include ____

A

Local conditions

Land cover and human land use patterns

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21
Q

For acute physical risks, why do we not need to rely exclusively on models?

A

Increased incidence is already visible in natural catastrophe data from past several decades

22
Q

Extreme hazard attribution science - provide three examples

A

Australian wildfires of 2019-20 made at least 30% more likely by CC

2019 Heatwaves in France unlikely to have occurred without CC

2020 Siberian Heatwave (40*c) almost impossible without CC

23
Q

Physical risks only occur when there is

A

Exposure and vulnerability

24
Q

Indirect risks include…

A

Supply Chain

Litigation

Systemic

25
Q

Provide an example of litigation risk in action where a firm has been sued for not adequately preparing for physical risks?

A

Conservation Law Foundation vs Shell

Claimed it had failed to prepare its terminals for sea level rises

26
Q

Give an example of systemic risk and labour

What is the opinion of the ILO

A

Effects of heat stress on worker productivity

ILO estimates that by 2030 the share of total working hours lost will be 2.2%
= 80million full time jobs
= USD2.4trillion in purchasing power

27
Q

As a proportion of global emissions, what % do the following sectors produce:

  • Electricity & Heat Production
  • Agricultural
  • Industries
  • Transportation
A
  • Electricity 25%
  • Agriculture 24%
  • Industries 21%
  • Transportation 14%
28
Q

Most models and scenarios for reaching 1.5*c assume very large

A

Amounts of net negative global emissions

29
Q

To achieve large amounts of net negative global emissions we need quick roll out of …

What are these highly dependent upon

A

Technologies and practices such as DAC (direct air capture) or BECCS

Highly dependent upon centralised policy options - i.e. imposing carbon tax or carbon price

30
Q

What are the most common policy options for achieving net zero

A

Carbon taxes or cap and trade schemes

31
Q

Provide an example of Government mandated closures

A

Biden cancelled Keystone XL pipeline permit

Germany passed a law mandating closure of all coal fire plants by 2038

32
Q

Legal risk comes in 2 strands - explain both

A
  1. Activist and advocacy organisations - suits against carbon intensive projects
  2. Nascent efforts to pin legal liability on firms for their contribution to physical impacts of climate change
33
Q

Example of activist and advocacy organisations litigation

A

ClientEarth vs Enea

claimed they had failed to consider transition risk of their coal plants

34
Q

Provide an example of litigation to pin liability on firms for their contribution to physical climate change

A

Peruvian Farmer vs RWE

Melting of glaciers causing increased flooding

35
Q

How is technology a transition risk?

A

Transition risk for older assets reliant on outdated technology

36
Q

What % has PV declined in price since 1970s

A

99.65%

37
Q

With each doubling in installed capacity, solar modules have dropped in price by __?

This is referred to as the ____

A

Dropped by 20%

‘Learning Rate’

38
Q

Batteries are on steep learning curves.

When are EVs likely to hit price parity with ICE vehicles?

A

Once battery prices reach USD100/kWh c.2023

39
Q

Example of firms having to cut value of assets (Market Risk)

A

BP and Shell both cutting asset values by c.$20bn in 2020

40
Q

Name.a mechanism through which transition risk impacts markets

A

Volatility in low carbon commodities - ie lithium

41
Q

What % of retail spaces and offices in Europe are exposed to floods / sea level rise?

A

19% of retail spaces

16% of offices

42
Q

___ found that US properties exposed to floods / sea level rise sell for ___ less on average than unexposed properties with similar characteristics?

A

Bernstein (2019)

7% less

43
Q

Bernstein found that properties exposed at 1ft of flooding saw what % discount?

Properties at 3ft of flooding saw what % of discount?

A

1ft - 14.7%

3ft - 4.4%

44
Q

_____ identified that local lenders pass on proportionally ___ SLR risk to secondary markets than whom?

What does this indicate?

A

Keenan & Bradt (2020

Local lenders pass on more risk to secondary markets than large national banks

Local lenders therefore have better access to local soft info on SLR

45
Q

Who proved that catastrophes prompt originators in US to increase the share of Mortgages just below the conforming limits of mortgages eligible for securitisation?

What does this mean for markets?

A

Ouazad and Kahn

Passing SLR Risk on to wider markets

46
Q

When will BTL E> come into effect for existing leases?

A

2023

47
Q

Coal power generation will be impacted by technology transition risk via…

A

Cost competition from renewables

48
Q

What is LCOE

A

Levelised cost of electricity

49
Q

What is the situation of solar in China?

A

Cost of new build solar now very close to cost of running existing coal fired power plants (38 MWh to 35$ per MWh)

50
Q

Wind and solar are now the cheapest forms of electricity for what % of the world’s population

A

2/3

51
Q

Example of company losing their social license to operate following physical risk disaster

A

PG&E in California - poorly maintained equipment and wildfires, 85 deaths.
Forest fire area doubled in Cali since 1980s due to CC.

52
Q

What happened to electricity in Texas and how was it interrupted by physical risk

A

Extreme cold spell (jet stream deviation) froze energy generation infrastructure

GARP SCR (7 decks)

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