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The 2023 Climate Risk Landscape: Technical supplement

Key points

The technical supplement to the 2023 Climate Risk Landscape Report is a comprehensive analysis of climate risk assessment outcomes from multiple vendors. It follows the The 2023 Climate Risk Landscape report released back in March of 2023. The report presents a comparison of vendor results based on a harmonised input of factors, offering financial institutions valuable insights into assessing the impact of a transition to a low-carbon economy on their counterparties’ creditworthiness. The supplement provides insights into various transition and physical risk metrics analysed by vendors, such as Climate Value-at-Risk (CVaR), Climate Transition Value-at-Risk (CTVaR), cumulative return, implied temperature rise, green and brown share, carbon performance analytics, physical risk score, physical Value-at-Risk (PVaR), and expected loss.

The report also highlights the challenges of comparing results obtained from different climate tools, even when assessing the same metric, which emphasises the importance of comprehending the assumptions of each tool. Understanding the underlying assumptions and metric definitions used in climate risk assessments is vital for accurate interpretation of the outcomes. For that, it is crucial for firms to be informed consumers and understand the assumptions made by each tool.