Ch03. Climate Change Risk
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Questions and Answers

What is the concept of stranded assets primarily linked to?

  • Unburnable innovation
  • Creative destruction (correct)
  • Creative construction
  • Environmental preservation

What is an example of an industrial asset with high transition risk?

  • Hydroelectric dam
  • Wind farm
  • Geothermal power station
  • Coal-fired power plant (correct)

What is the term used to describe known oil or coal reserves that cannot be fully exploited if the agreed goals of limiting warming are to be met?

  • Unburnable carbon (correct)
  • Carbon credits
  • Emission offsets
  • Stranded resources

What type of risk can also create stranded assets, similar to the physical meaning of the original metaphor?

<p>Physical risk (D)</p> Signup and view all the answers

What is the primary reason for the devaluation of stranded assets?

<p>Unanticipated or premature write-downs (C)</p> Signup and view all the answers

What is the main consequence of stranded assets in the context of climate change?

<p>Increased risk of climate-related liabilities (A)</p> Signup and view all the answers

What is an example of a high-emissions facility that would be exposed to tighter climate policy?

<p>Coal-fired power plant (D)</p> Signup and view all the answers

What is the primary factor that determines vulnerability to physical climate risk at the facility level?

<p>Physical infrastructure (B)</p> Signup and view all the answers

What is the concept of stranded assets primarily related to in the context of climate risk?

<p>Transition risks (B)</p> Signup and view all the answers

What is the term used to describe the propensity of an asset to suffer adversely from its exposure to hazards?

<p>Vulnerability (B)</p> Signup and view all the answers

What is the primary reason why high-emissions facilities are more likely to be affected by climate policy?

<p>Their high carbon footprint (D)</p> Signup and view all the answers

What type of risk is associated with acute weather hazards such as floods and cyclones?

<p>Physical Risk (A)</p> Signup and view all the answers

What is the focus of research and analytical efforts in recent years to better understand climate, environmental, and broader sustainability risks?

<p>Stranded assets (D)</p> Signup and view all the answers

Which of the following is an example of a facility-level adaptation to physical risk?

<p>Installation of flood pumps (A)</p> Signup and view all the answers

What type of risk is associated with policy changes, such as carbon taxes, that can render certain assets unprofitable?

<p>Transition Risk (C)</p> Signup and view all the answers

Which of the following is an example of a corporate-level adaptation to transition risk?

<p>Deployment of biomass or hydrogen powered vehicles (C)</p> Signup and view all the answers

What is the primary driver of stranded assets due to transition risk?

<p>Technological changes, such as cheaper renewables (A)</p> Signup and view all the answers

According to the Caldecott et al. framework, what is the formula for calculating physical risk?

<p>Hazards x Exposure x Vulnerability (D)</p> Signup and view all the answers

What is the main goal of the TCFD recommendations regarding climate change?

<p>To provide decision-useful, forward-looking information on financial impacts of climate change (A)</p> Signup and view all the answers

What is one of the key features of the TCFD recommendations?

<p>They are designed to be adoptable by all organizations (D)</p> Signup and view all the answers

What is the focus of the TCFD recommendations regarding climate change?

<p>Transition to a low-carbon economy (B)</p> Signup and view all the answers

What is the primary objective of the TCFD recommendations in terms of financial reporting?

<p>To increase transparency and disclosure of climate-related risks (D)</p> Signup and view all the answers

What is the relationship between the TCFD recommendations and financial filings?

<p>The TCFD recommendations are included in financial filings (A)</p> Signup and view all the answers

What is the ultimate goal of many countries in terms of climate change mitigation?

<p>To achieve net-zero emissions (C)</p> Signup and view all the answers

What is the primary challenge in modeling direct physical climate risk?

<p>Lack of data on exposure and vulnerability (D)</p> Signup and view all the answers

What is the key benefit of identifying and disclosing climate-related risks and opportunities through the TCFD framework?

<p>Improved climate risk management and mitigation (C)</p> Signup and view all the answers

What is the primary driver of transition risk in the context of climate change?

<p>Changes in climate policy and regulation (D)</p> Signup and view all the answers

What is the primary focus of the TCFD framework in terms of climate risk disclosure?

<p>Disclosure of climate-related risks and opportunities (B)</p> Signup and view all the answers

What is the primary implication of climate change for the financial sector?

<p>Increased risk of stranded assets and devaluation (C)</p> Signup and view all the answers

What is the primary objective of climate risk assessment in the context of the financial sector?

<p>To identify and quantify climate-related risks and opportunities (B)</p> Signup and view all the answers

What is the primary focus of understanding climate risk?

<p>Understanding how physical climate hazards and drivers affect firms and financial outcomes (B)</p> Signup and view all the answers

What is the distinct subset of climate change discussions that the TCFD framework primarily addresses?

<p>Climate risk (C)</p> Signup and view all the answers

What is the primary objective of viewing climate change through a risk lens?

<p>To understand how climate change affects assets and financial outcomes (C)</p> Signup and view all the answers

What is the primary focus of the TCFD framework in categorizing climate risk?

<p>Physical climate hazards and drivers (B)</p> Signup and view all the answers
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