GARP SCR : Sustainability and Climate Risk

An economist at a large US state pension fund assesses transition risk and opportunities in response to pensioner requests that the fund increase transparency on climate strategies. The economist uses IAMs to inform this analysis.
Which of the following will the economist most likely demonstrate by using IAMs?

• A. Which SSP is a feasible emission trajectory for each RCP
• B. Agreement among climate projections
• C. Economically efficient paths to limit warming below 2°C
• D. The remaining carbon budget for each investment

A major hurricane extensively damages the electrical infrastructure of a utility company. To improve the utility's risk management, the risk director prepares a strategy plan and incorporates climate risk considerations within the existing risk management framework.
Which recommendation should the director make to incorporate climate risk into the framework's risk identification component?

• A. Flag any substantial changes in the utility's external environment to trigger a modification of the risk management process.
• B. Evaluate the vulnerability and adaptive capacity of facilities using data gathered on the scope of climate risks.
• C. Examine the transmission channels of climate risk drivers into financial risk to determine which risks are likely to materialize for the utility.
• D. Rate risks on impact and level of control to focus on risks with the most severe impact but over which the utility has the most control to improve outcomes.

An insurance firm announces it will adopt sustainable practices. To inform sustainable strategy, a company risk analyst researches climate risk. The analyst reviews how climate risk manifests as financial risk through effects on microeconomic company-level risks on various types of companies and institutions. The analyst also identifies possible opportunities resulting from climate risk. Risks and opportunities are presented to senior management.
Which of the following does the analyst cite as an example of how climate risk affects liquidity risk?

• A. A bank's customers withdraw deposits and draw on credit lines to finance cash-flow needed for recovery after damaging flooding, which increases loan-to-deposit ratios.
• B. A company's high-emissions factory is hit with a higher carbon tax that results in asset stranding, which causes the company to have less collateral to use to secure funding.
• C. A mining company that extracts lithium for lithium-ion batteries benefits from higher commodity prices, which increases revenue and profits.
• D. A company's warehouse that is damaged by a tornado causes business interruption that results in loss of revenues and profits, which weakens the company's ability to repay loans.

An EU vehicle braking system manufacturer implements a new sustainability framework for SLBs to finance projects with environmental and social benefits. The company sustainability team prepares a new SLB and submits the bond to an external reviewer for assessment. The bond contains four KPIs:
1. Scope 1 CO2 emissions
2. Supplier engagement on GHG emission reduction
3. Percentage of renewable energy used
4. Percentage of women in managerial roles
The bond benchmark year is 2022 and the bond will mature in 2030 Which of the following SPTs did the reviewer find aligns with the core components of SLB Principles?

• A. Increase women representation in managerial positions to 33% by 2025 and to 50% by 2030.
• B. Reduce emissions from purchased raw materials by 60% by 2030.
• C. Increase renewable energy use to 20% by 2035 and to 50% by 2050.
• D. Engage multiple suppliers to expand commitment to emission reduction targets by 30% by 2030.

An alliance of electricity power producers examines a proposed cap-and-trade regulation that would affect most members. The alliance lobbies lawmakers to strengthen banking and borrowing provisions in the proposed regulation, allowing increased flexibility for the sector to comply with emissions limits.
What component of climate risk is the alliance directly attempting to influence?

• A. Exposure
• B. Vulnerability
• C. Drivers
• D. Hazards