Transitional Climate Risks in the Private Sector - Risks and Opportunities

Overview

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a Past (blue) and future (red) global GHG emissions in MtC under the RCP 2.6 scenario; b Policy revisions needed for meeting GHG emission targets in the EU

This paper describes the challenges and opportunities associated with climate change adaptation, particularly focusing on transitional risks within the private sector. Beginning with the identification of physical and transitional risks, the discussion centers around the European Green Deal as a significant policy development, advocating for a reduction in emissions and aligning with Paris Agreement targets. The importance of recognizing transitional risks as potential market disruptions and opportunities for innovation is underscored, particularly in the evolving regulatory landscape and stakeholder expectations.

In the methods section, the document covers the complexities of assessing and reporting transitional risks, emphasizing the significance of including Scope 3 emissions in companies' analyses. It evaluates various methods, such as Environmentally Extended Input–Output models and Life Cycle Assessments, providing a nuanced understanding of their strengths and challenges. The text concludes by highlighting the critical role of accurate emissions assessments in fostering innovation and development, urging companies to acknowledge and address their emissions for a successful transition to a low-carbon future. The document advocates for collaboration across the value chain and recommends the inclusion of value chain-related emission analysis in sustainable finance platforms, emphasizing the need for greater harmonization in guidelines for assessing emissions in both industrial and financial sectors.