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Climate tango: principles for integrating physical and transition climate risk assessment with sectoral examples

In this report UNEP FI TCFD programme and ClimateWise, explore the combined financial impact of physical and transition risks. The report has developed theoretical principles and practical steps for implementation of an integrated assessment of physical and transition risks with examples of sectoral analysis. The research builds on the existing methodology and tools, as well as workshops and interviews with financial practitioners.

Key points

Principles for integrated assessment of physical and transition risk

  1. Approach: Conduct transition and physical risk analysis simultaneously
  2. Level of analysis: Be sector-specific as well as location-specific
  3. Quantification: Capture climate risk impacts via forward-looking metrics
  4. Scenario-based analysis: Take into account feedback loops between physical and transition risk
  5. Relevance: Align to TCFD pillars