Week 10 - Physical and Transition Risk Flashcards
What are Physical Risks?
Threats and opportunities related to changing weather pattern. E.g., in NZ’s agricultural sector.
- Increasing frequency of drought
- Water availability
- Increaseintemperatures/risingsea level
- Extreme weather events (cyclones/hail/flooding)
What are Transition Risks?
Challenges and opportunities related to regulation and market changes.E.g., in NZ’s agricultural sector.
- Changes in purchasing behaviour
- Customer expectations and requirements
- Govt regulation and policy (inc. market access)
- Technology changes
- New financing criteria and products
Climate Scenarios - Disorderly (Met, Disorderly) based on whether Paris Agreement 2050 emission reduction target are met.
Sudden and unanticipated response is disruptive but sufficient enough to meet climate goals.
Climate Scenarios - Too little too late (Not Met, Disorderly) based on whether Paris Agreement 2050 emission reduction target are met.
We don’t do enough to meet climate goals, the presence of physical risks spurs a disorderly transition.
Climate Scenarios - Orderly (Met, Orderly) based on whether Paris Agreement 2050 emission reduction target are met.
We start reducing emissions now in a measured way to meet climate goals.
Climate Scenarios - Hothouse World (Not Met, Orderly) based on whether Paris Agreement 2050 emission reduction target are met.
We continue to increase emissions doing very little, if anything, to avert the physical risks.
Example of a risk workshop
- Identify risks (threats and opportunities) for the business
- Evaluate the risk
- Identify and evaluate controls
Describe the Risk Assessment
Once you’ve identified a risk, please assess the
* Consequence of the threat/opportunity on the business
- Rate this between 0-5
- 5 means major impact (positive or negative)
- Likelihood of this impact occurring
- Rate the between 0-5
- 5 means high likelihood of occurring
- Confidence
- How certain are you of the consequence/likelihood rating you’ve provided?
- Low (1), Moderate (2), High (3)
Risk Controls
- Are there ways to mitigate threats or leverage opportunities?
- How would this change the consequence and likelihood
Timeframes
(this card needs more context)
- We are going to start by identifying and evaluating g risk in the next few years
- Then, to consider long term risks, we will use scenarios
Social Impacts of Hot-house
- There is huge global demand for food as population grows and agriculture land is affected by climate change.
- No increased demand for sustainable food
- Challenge is attracting employees to the agriculture sector due to physical impacts of climate change
Environmental Impacts of Hot-House
- Steadily increasing severe acute and chronic weather events. Global warming 2.4°C and increasing.
- Either too much or too little water, leading to variable production and quality. Community tension over lack of water
control/who should have priority. - Soil is eroded and extreme weather causes significant damage. Uncurbed urban expansion has used a large amount of
productive land. - Competition for land area from urban expansion and alternative crops (e.g., soybean, kumara)
Technology Impacts of Hot-House
- Lack of sustainable technology advancements
- Delayed realisation of the potential of GMO
Policy Impacts of Hot-House
- Lack of policy for agriculture leading to lack of support systems.
- There are challenges accessing capital due to the extent of physical impacts of climate change.
Markets Impacts of Hot-House
- Some premium sustainable products maintain NZ premium image but others lose it as
environmental issues are deprioritised - There is unpredictability around the ability to export goods.
Hot-House: Orchards lose productivity because of a lack of access to water:
Orchardists/organisations face increased maintenance
and rebuild costs, insurance and tax costs
Hot-House: There is a loss of productive land due to the physical impacts of climate change
Pest incursions and biosecurity issues become more common, damaging crops and afflicting orchards
Hot-House: Food security is threatened for New Zealand. Tensions rise as export prices are more favourable than supplying the domestic market
Insurance/capital is available but the physical impacts of climate change make some regions uninsurable and
too risky for finance