Taxonomy

• Catastrophe modeling It typically includes three modules, a hazard module – where it assesses the extent and intensity of climate hazards, a vulnerability module – that relates hazard to physical damage, and a financial model that translates physical damage to financial losses. Typically, the key output of a catastrophe model is the distribution of possible losses, expressed in financial terms, to the portfolio. The common set of outputs of catastrophe models include average annual loss, average probability of occurrence, annual exceedance probability curve, and return periods.
• Climate hazard data These are the data describing the drivers of physical risk. These data include climate information or information about current and projected hazard events. They may be used as explanatory variables to influence economic outcomes and alter existing economic relationships, or to identify at-risk locations with other geographical data (e.g. topographical data including coastal elevation models, satellite data), or cost and performance data for energy substitutes that can be used in estimating energy price relationships.
• Climate-related Financial Risk
• Climate Value at Risk
• Damage Function
• Exposure Data These are data describing exposures to the climate hazard. Key features used to construct the exposures include specific geographic locations of assets and systems, building or infrastructure characteristics such as construction materials, height, and flood resistance.
• Economic and Financial Data These are the data needed to assess the impacts on the economy and financial sector. Key datasets required include balance-sheet data for systematically important banks and macroeconomic data.
• Vulnerability Data These are the data describing the vulnerability of exposed assets and systems.
• Monte Carlo Simulation
• Physical Risk
• Transition Risk
• Scenario Analysis
• Stress test
• Monte Carlo simulation

See Climate Scenario Taxonomy by the Financial Sector for more.