1.2 Climate Risk Metrics

The climate impact metrics are accompanied by climate risk metrics and can be differentiated between transition risk and physical risk metrics. Transition risk metrics represent the risk stemming from a carbon tax. The more carbon an asset emits, the higher the (potential) carbon tax and, hence, the higher the financial risk. The physical risk metrics cover financial risks from floods, storms, and cyclones based on an asset’s modelled damage factor and thermal stress when extreme temperatures affect an asset’s operational business.