Risks

PHYSICAL CLIMATE RISKS

Physical climate risks can have costly consequences, which is why this issue is becoming increasingly important for property owners to consider. By identifying these risks, you can climate-proof your properties in time and avoid unforeseen costs. Physical risks are generally divided into two categories: acute and chronic. Acute climate risks include short-term risks that are often unpredictable and arise from a single climate or weather event. Chronic climate risks include risks that increase over a longer period and are a consequence of gradual climate changes due to global warming.

TRANSITION RISKS

The climate is changing – and it will continue to change even more. How severe climate change becomes depends on the amount of greenhouse gas emissions produced globally and how quickly we manage to reduce them.

Along with the climate, legislation and stakeholder requirements are also evolving. This introduces new rules of the game, and those who fail to adapt will fall behind.

Risk and opportunity come in pairs. The best strategy is therefore to acknowledge the risks you face and turn them into opportunities. When analyzing transition risks according to the Task Force on Climate-Related Financial Disclosures (TCFD), the following criteria should be considered:

• Political & legislative changes
• Market
• Technology
• Marketing

The results of a transition analysis help you understand your properties’ capacity to adapt to changing conditions brought by the climate transition. In addition, the TCFD-aligned transition analysis can serve as a basis for assessing financial materiality within a double materiality analysis, where the climate’s impact on operations is considered.

In combination with a climate risk analysis that considers physical climate risks, the transition analysis can also constitute a central part of an analysis of climate-related risks and opportunities, which is a requirement under CSRD and ESRS.