Physical risks

Physical risks are the associated material impact resulting from climate change hazard events. Such events are either acute or chronic. Acute risks refer to single-hazard events such as hurricanes and floods. In contrast, chronic risks refer to general shifts in climate patterns resulting in long-term consequences such as rising sea levels. Due to many contributing components, the exact relationship between chronic long-term climate change and immediate acute weather events is primarily unknown. However, climate change is expected to result in higher counts of more severe extreme weather events in the near future (Bevere & Gloor, 2020; Herring et al., 2015; Sun et al., 2014; TCFD, 2017; USEPA, 2022).

As chronic physical risks are material only in the long term and hard to establish, quantifying acute physical risk is the most common approach. Acute climate change weather impacts can be assessed in three components: the types of hazard events, the magnitude of hazard events, and the exposure and vulnerability of assets in the path of the hazard event.

_{Bevere, L., & Gloor, M. (2020, April 8). Sigma 2/2020: Natural catastrophes in times of economic accumulation and climate change.}_{Swiss Re Institute}_._{https://www.swissre.com/institute/research/sigma-research/sigma-2020-02.html}

_{Herring, S.C., Hoerling, M.P., Kossin, J.P., Peterson, T.C., & Stott, P.A. (2015). Explaining extreme events of 2014 from a climate perspective.}_{Bulletin of the American Meteorological Society}_,_96,_1-172._{https://doi.org/10.1175/bams-explainingextremeevents2014.1}

_{Sun, Y., Zhang, X., Zwiers, F.W., Song, L., Wan, H., Hu, T., Yin, H., & Ren, G. (2014). Rapid increase in the risk of extreme summer heat in eastern China.}_{Nature Climate Change}_,₄_{, 1082-1085.}_{https://doi.org/10.1038/nclimate2410}

_{TCFD. (2017). Recommendations of the Task Force on Climate-related Financial Disclosures. Final Report.}_TCFD_._{https://assets.bbhub.io/company/sites/60/2021/10/FINAL-2017-TCFD-Report.pdf}

_{USEPA. (2022). Climate change indicators: Weather and climate.}_{United States Environmental Protection Agency}_._{https://www.epa.gov/climate-indicators/weather-climate}