SCR Exam Global & Regional Protocols & Frameworks Transition Risk Assessment

cheat sheet • NGFS: Key methodology – Scenario Analysis; creates

consistency & comparability of results
Steps in TRA:
1. Discover and prepare
Link for Udemy Course on SCR Prep • ISSB: Operates under IFRS; Private body; Creates 2. Assess risks (based on EPA)
baseline of sustainability disclosures 3. Standardize approach for specific sectors
Link for SCR Practice Test • IFRS S1: Sets out general requirements for the disclosure
content and presentation of the disclosures
Nature Risk Assessment
• IFRS S2: Climate-related disclosures; sets out specific • Nature risk refers to the risks associated with the loss of
Climate Risk Assessment
requirements for disclosures related to climate risks and natural assets.
• Measurement: Quantifies climate change impacts opportunities • Nature risk can also contribute to systemic geopolitical risk.
(financial metrics) • TCFD Vs NGFS: TCFD develops voluntary guidelines for • 2 key aspects: the business's dependencies on nature and
o Identifies risk drivers & channels climate related financial disclosures; NGFS integrates its impacts on nature.
o Maps & measures exposures climate risk management into the financial sector &
• Assessment: Understands the nature of impacts develops scenario analysis framework Biodiversity and Ecosystem Risk
(qualitative) • ISSB Vs TCFD: ISSB develops global baseline for • Biodiversity and ecosystem risks represent nature risk, and
o Identifies potential hazards sustainability reporting. Provides specific standards like interplay with climate risk assessment.
o Analyzes likelihood & consequences (across IFRS S1. ISSB has included TCFD recommendations too. • Nature risk and climate risk are interdependent yet distinct;
sectors/systems) • ISO 14091: About how to understand vulnerability and They can amplify each other.
• Considers vulnerability & exposure (socioeconomic factors) develop and implement a sound risk-assessment process. • Biodiversity’s Effects on Businesses: Ecological,
• ISO/TM 14092: Specifies requirements and guidance on Liability, Market, Financial, and Reputational
CRA: is a process to to identify, analyze, & manage potential adaptation planning for local governments & communities. • Measuring Biodiversity: Quite difficult than climate
impacts of climate change. • Business for Social Responsibility (BSR): Key steps: change measurement.
Identify climate risk > Integrate climate risks into ERM > • PBAF (Partnership for Biodiversity Accounting
CRA IN INSURANCE INDUSTRY Prioritize risks > Governance Financials): Steps in a biodiversity footprint:
• Regulations are changing: Insurers must consider Step 1: Understand the investment
climate risks in Enterprise Risk Management (ERM).
Data Sets and Tools Step 2: Assess environmental inputs and outputs
• Supervisory practices: Regulators are factoring climate • UNEP FI develops resources for Fis on the structure, Step 3: Assess impact drivers and the impact on
risks into their oversight. coverage, and methodologies of commonly used tools. biodiversity
• Recommendations: • Essential data points for CRAs: Weather, climate, Step 4: Interpret the results and take action
• Guidelines for monitoring climate risks. environmental changes, and natural disasters • TNFD disclosure framework: 4 Pillars: Governance;
• Including climate risks in risk management practices Strategy; Risk & Impact Assessment; and Metrics &
Scenario Analysis Targets.
(ORSAs).
• Stress testing & scenario analysis. • Complexity and demanding analytical modeling • LEAP (Locate, Evaluate, Assess, Prepare): Pinpoints
• Assists in assessing climate resilience and evaluates nature-related challenges.
CRA for Businesses • Suggested Steps: Integrate scenario analysis in strategy Key concepts in LEAP: Drivers; Dependencies &
• Analyzes potential impacts of climate change on operations planning; Assess materiality; Identify/define range of Impacts; Threshold; Biodiversity Indicators
• Identifies physical risks (extreme weather, climate shifts) scenarios; Evaluate business impacts; Potential responses • Financing mechanisms for biodiversity & ecosystem
• Identifies transition risks (shift to low-carbon economy) • ISSB Recommendation: Consider all “reasonable & projects: Public, Private, and Blended
• Helps businesses manage these risks supportable info”; Off-the-shelf scenarios can be used. • Challenges in financing biodiversity and ecosystem
projects include:
Physical Risk Assessment
Regulation - Growing recognition of climate-related risks 1. Data availability and standardization
within and beyond financial sector. Steps in PRA based on NGFS: 2. Complexity of biodiversity loss
Opportunities: Innovation – New Green Products; Enhanced 1. Define needs and objectives 3. Lack of standard tools and methods
Risk Mgmt; Enhance brand reputation; Better access to 2. Identify available data and resources 4. Funding gaps
capital; Subsidies and incentives 3. Define the scope and approach 5. Lack of info on biodiversity impact
4. Generate climate scenario 6. Reliance on public funding and philanthropy
• Nature risk is not well included in physical or transition risk 5. Estimate impact
6. Present and interpret the results

Chapter IX: Climate Risk Assessment

 SCR Exam
cheat sheet
Link for Udemy Course on SCR Prep

Link for SCR Practice Test

Water Risk Assessment

• Impacts of climate change on water resources:
1. Water supply/quantity – Disruption of sources
2. Water quality – Impairment of water quality
3. Energy Production – Significant consumer of water,
therefore, might hamper energy production
4. Agriculture – Disrupt food availability
• WRA and role in nature risk assessment:
2 way evaluation: Location or physical risk; Regulatory Risk
• WRAs are conducted at both basin (broad) and
operational (company specific) level.
• How WRAs play a role in nature risk assessment:
1. Identifying water-related risk
2. Managing and mitigating risks
3. Adaptive business strategy

Chapter IX: Climate Risk Assessment