Resources

• Glossary

  A

  Acute physical risk: An acute physical risk is driven by a specific weather event or hazard (such as flood, heatwaves, wildfire, storm events, etc.) And materialise as a shift in the frequency and magnitude of extreme events. These impacts are typically immediate or abrupt in nature

  Adaptation: In human systems, the process of adjustment to actual or expected climate and its effects, in order to moderate harm or exploit beneficial opportunities.

  In natural systems, the process of adjustment to actual climate and its effects. Human intervention may facilitate the adjustment to expected climate and its effects [1].

  Adaptive capacity: Characteristics or actions that may reduce the level of risk posed by a hazard and thereby alleviate vulnerability. Adaptive capacity reduces the potential impact of a sensitive asset. For example:

  • Increasing the diameter of culverts that channel stormwater away from assets enhances the adaptive capacity of places that face flooding from increasingly heavy rainfall.
  • Implementing early warning systems to give time to staff and communities to prepare can also improve adaptive capacity.

  It is important to understand the distinction between exposure and vulnerability when assessing physical risks as it is possible to be exposed but not vulnerable to a hazard (that is, by having implemented strong adaptation measures). However, if an asset is vulnerable to physical climate risks, then it is exposed [2].

  Avoided emissions: Avoided emissions are defined as the positive impact on society when comparing the GHG impact of a solution to an alternative reference scenario where the solution would not be used. Avoided emissions should be reported separately to Scope 1, 2 and 3 emissions [3].

  AR: Assessment Report

  B

  BAU: Business as usual

  C

  CCRA: Climate change risk assessment

  Carbon intensity: The amount of emissions of CO2 released per unit of another variable such as GDP, output energy use, or transport [1].

  Carbon offsetting: Carbon offsetting is a mechanism used to compensate for corporate or individual carbon footprints through the purchase and retirement of a verified ‘carbon credit’ issued via an internationally recognised and publicly-accessible registry. Each credit represents one tonne of CO2e avoided or removed from the atmosphere and is equivalent to one tonne of CO2e emitted by the entity [3].

  Chronic physical risk: A chronic physical risk is driven by longer-term shifts in the mean and variability of climatic patterns (for example, sea level rise and mean temperature rise). Consequently, these impacts are typically more incremental and pervasive.

  CO2: Carbon dioxide

  CO2 equivalent (CO2-eq) emission: The amount of CO2 emission that would cause the same integrated radiative forcing or temperature change, over a given time horizon, as an emitted amount of a GHG or a mixture of GHGs.

  D

  Decarbonisation: Decarbonisation is the term used for the reduction or elimination of CO2 emissions, for example by switching to low-carbon energy/power sources, achieving a lower output of GHGs into the atmosphere.

  E

  E&S: Environmental and Social

  ESG: Environmental, Social and Governance

  Exposure: The presence of people, their livelihoods, and assets in places and settings that could be adversely affected [3]. Exposure is one of the defining components of physical climate risk. If a hazard occurs in an area of no exposure, then there is no risk. For example, a hurricane making landfall in an area where there is no property or people.

  F

  FMCG: Fast-moving consumer goods

  FSB: Financial Stability Board

  G

  GFANZ: Glasgow Financial Alliance for Net-Zero

  GHG: Greenhouse gas

  Global warming potential: Global warming potential (GWP) values describe the radiative forcing impact (or degree of harm to the atmosphere) of one unit of a given GHG relative to one unit of CO2. GWP values convert GHG emissions data for non-CO2 gases into units of carbon dioxide equivalent (CO2e) [4].

  GPs: General Partners

  GWP: Global warming potential

  H

  Hazard: A physical climate process or event which can harm humans, business and the environment. It is defined by the IPCC as the potential occurrence of a natural or human-induced physical event or trend that may cause loss of life, injury, or other health impacts, as well as damage and loss to property, infrastructure, livelihoods, service provision, ecosystems and environmental resources [1].

  I

  ICT: Information and communications technology

  IDX: Indonesia Stock Exchange

  IEA: International Energy Agency

  IFRS: International Financial Reporting Standards

  IPCC: Intergovernmental Panel on Climate Change

  ISSB: International Sustainability Standards Board

  J

  JSE: Johannesburg Stock Exchange

  L

  LPs: Limited Partners

  N

  NDC: Nationally Determined Contribution

  Net-zero emissions: Net-zero emissions are achieved when emissions of GHGs to the atmosphere are balanced by anthropogenic removals [1].

  A sub-component of this is Corporate Net Zero, which requires setting corporate targets aligned with meeting societal climate goals means (1) achieving a scale of value chain emissions reductions consistent with the depth of abatement at the point of reaching global net zero in 1.5°C pathways and (2) neutralising the impact of any residual emissions by permanently removing an equivalent volume of CO2 [3].

  NGFS: Network for Greening the Financial System

  NGOs: Non-governmental organisations

  NOAA: National Oceanic and Atmospheric Information

  P

  PCAF: Partnership for Carbon Accounting Financials

  PE: Private equity

  Ppm: Parts per million

  PRI: Principles for Responsible Investing

  R

  RCP: Representation Concentration Pathways

  Resilience: The capacity of social, economic and environmental systems to cope with a hazardous event or trend or disturbance, responding or reorganising in ways that maintain their essential function, identity and structure, while also maintaining the capacity for adaptation, learning and transformation.[Footnote: This definition builds from the definition used by Arctic Council [1].

  S

  Scenario: A plausible description of how the future may develop based on a coherent and internally consistent set of assumptions about key driving forces (for example, rate of technological change (TC), prices) and relationships. Note that scenarios are neither predictions nor forecasts, but are used to provide a view of the implications of developments and actions [1].

  Scenario analysis: Scenario analysis is a process for identifying and assessing a potential range of outcomes of future events under conditions of uncertainty. In the case of climate change, for example, scenarios allow an organisation to explore and develop an understanding of how the physical and transition risks of climate change may impact its businesses, strategies, and financial performance over time [6].

  Science-based target: Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement [48].

  Sensitivity: Sensitivity reflects the predisposition of organisations, assets, societies, processes, or systems to be adversely affected by climate-related risks. If an asset could sustain a negative impact from a hazard, it is sensitive to that hazard. For example, the yield of crops with a high sensitivity may be reduced in response to a change in daily maximum temperature during the pollination season.

  SET: Stock Exchange of Thailand

  Signpost metrics: Signpost metrics are significant, easily-tracked indicators which indicate how closely reality is mirroring scenarios in a scenario analysis process. This information can be used to understand which scenario’s circumstances most closely match real world developments, and how the business strategy should be adjusted.

  SSP: Shared Socioeconomic Pathways

  Stranded assets: Assets exposed to devaluations or conversion to ‘liabilities’ because of unanticipated changes in their expected revenues due to innovations and/or evolutions of the business context, including changes in public regulations at the domestic and international levels [4].

  T

  TCFD: Taskforce on Climate-related Financial Disclosures

  Transition plan: An aspect of an organisation’s overall business strategy that lays out a set of targets and actions supporting its transition toward a low-carbon economy, including actions such as reducing its GHG emissions [31].

  Transition risk: Transition risks are related to the process of adjustment towards a low-carbon economy. Transitioning to a lower-carbon economy may entail extensive policy, legal, technology, and market changes to address mitigation and adaptation requirements related to climate change. Depending on the nature, speed, and focus of these changes, transition risks may pose varying levels of financial and reputational risk to organisations.

  Transmission channel: Transmission channels are the causal chains that explain how climate risk drivers give rise to financial risks that impact financial institutions directly or indirectly.

  U

  UNEP: United Nations Environment Programme

  V

  Vulnerability: Vulnerability, which is determined as a function of sensitivity and adaptive capacity, is the degree to which assets will be, or have the potential to be, negatively affected by risk. The IPCC definition of vulnerability refers to the propensity of exposed elements such as human beings, their livelihoods, and assets to suffer adverse effects when impacted by hazard events [6]. The vulnerability of an investment is dependent on both the managerial capacities of the investee, as well as the characteristics and nature of the investment [2].

  W

  WEF: World Economic Forum

  WRI: World Resource Institute

• References
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  [2] United Nations. Financing Climate Action (2020) https://www.un.org/en/climatechange/raising-ambition/climate-finance.

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  [4] IPCC. Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. P. Shukla, J. Skea, R. Slade, A. A. Khourdajie, R. van Diemen, D. McCollum, M. Pathak, S. Some, P. Vyas, R. Fradera, M. Belkacemi, A. Hasija, G. Lisboa, S. Luz, J. Malley (2022).

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