Chapter 3. Climate change risk

Question 1

Climate risk is related to

Answer 1

Financial risks linked to climate change

Question 2

How can physical climate risk be caused?

Answer 2

Physical climate risk can be caused by the physical effects and changing weather patterns that result from climate change.

Question 3

How can transition climate risk be caused?

Answer 3

Transition climate risk can be caused by efforts to reduce and eliminate the greenhouse gas emissions that cause it

Question 4

IPCC stands for

Answer 4

Intergovernmental Panel on Climate Change

Question 5

UNFCCC stands for

Answer 5

United Nations Framework Convention on Climate Change

Question 6

Subtypes of transition climate risk

Answer 6

Policy and Legal
Technology
Market
Reputational

Question 7

TCFD stands for

Answer 7

Taskforce on Climate-Related Financial Disclosures

Question 8

TCFD’s key disclosure parameters

Answer 8

• 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.

Question 9

What are stranded assets?

Answer 9

Assets that have “suffered from unanticipated or premature write-downs, devaluations or conversion to liabilities.”

Question 10

From a physical risk perspective, hazards are subdivided in

Answer 10

Acute and Chronic

Question 11

The chronic climate hazard includes gradual, long-term trends, like…

Answer 11

• Average temperature rise
• Sea level rise
• Changing precipitation patterns

Question 12

The acute climate hazard includes weather-related or weather-exacerbated events whose incidence increases with climate change, such as…

Answer 12

• Storms and hurricanes
• Droughts
• Heatwaves
• Precipitation extremes and floods
• Wildfires

Question 13

Which is the TCFD disclosure recommendation on Governance?

Answer 13

Disclose the organization’s governance around climate-related risks and opportunities.

Question 14

Which is the TCFD disclosure recommendation on Strategy?

Answer 14

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.

Question 15

Which is the TCFD disclosure recommendation on Risk Management?

Answer 15

Disclose how the organization identifies, assesses, and manages climate-related risks.

Question 16

Which is the TCFD disclosure recommendation on Metrics and Targets?

Answer 16

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.

Question 17

Which are the TCFD supporting recommended disclosures on Governance?

Answer 17

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.

Question 18

Which are the TCFD supporting recommended disclosures on Strategy?

Answer 18

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.

Question 19

Which are the TCFD supporting recommended disclosures on Risk Management?

Answer 19

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.

Question 20

Which are the TCFD supporting recommended disclosures on Metrics and Targets?

Answer 20

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.