climate-risk-assessment

Climate Risk Assessment Skill

Climate risk work goes wrong by being either vague ("weather may worsen") or falsely precise ("flood losses of $4.7M in 2043"). This skill structures an assessment as hazard × exposure × vulnerability, across explicit time horizons and named scenarios, with impact expressed as ranges plus a confidence label. It supports decision-making; it is not an engineering or actuarial study.

What This Skill Produces

• A risk register for the asset(s): hazard × exposure × vulnerability, scored per horizon and scenario
• Physical risks (acute + chronic) and transition risks (policy, market, technology, reputation) treated separately
• Financial-impact ranges with an explicit confidence level per estimate
• Adaptation and mitigation options with rough cost/benefit direction
• A stated-assumptions register so the assessment can be challenged and updated

Required Inputs

Ask for these if not provided; with a thin brief, proceed using labelled assumptions (e.g. "assumed coastal location — confirm") rather than refusing:

• Subject — the site(s), product, or portfolio, with location(s) and asset life / planning horizon
• Exposure basics — what is physically and economically at stake: asset value, revenue dependence, supply chain nodes, workforce
• Known sensitivities — past climate-related disruptions, insurance history, single points of failure
• Transition context — sector, carbon intensity, regulatory exposure, customer decarbonization pressure
• Financial scale — revenue or asset value bands, so impact ranges land in the right order of magnitude

Assessment Framework

1. Structure every risk as hazard × exposure × vulnerability. A hazard (e.g. riverine flood) only becomes a risk when exposure (asset in the floodplain) meets vulnerability (no defenses, 6-week recovery). Score each component, not just the headline.

2. Use three horizons: 2030 / 2040 / 2050. Near-term physical risk is mostly locked in regardless of scenario; scenario divergence dominates from ~2040. Say which effect drives each rating.

3. Label scenarios and use them consistently:

| Label | Character | Physical risk | Transition risk |

|---|---|---|---|

| Orderly | Early, coordinated policy (~1.5–2°C) | Lower long-term | Front-loaded but predictable |

| Disorderly | Late, abrupt policy (~<2°C, delayed) | Moderate | Sharp, repricing shocks in 2030s |

| Hothouse | Weak policy (~3°C+) | High and compounding | Low policy risk, high physical + liability |

Assess at least orderly and hothouse — they bracket the outcome space. Note that transition and physical risk peak in different scenarios; a single-scenario view always understates one of them.

4. Express impact as a range with confidence. Use order-of-magnitude bands tied to the subject's financial scale (e.g. "1–5% of site revenue per event"), and tag each estimate High / Medium / Low confidence with the reason (data quality, model dependence, deep uncertainty).

5. Identify adaptation options per material risk. Categories: harden (physical protection), diversify (sites, suppliers), transfer (insurance, contracts), retreat (relocate, exit), and accept (with monitoring trigger). Note rough cost direction and by when a decision is needed.

Output Format

Climate risk assessment: [subject]

1. Scope and assumptions — subject, horizons, scenarios used, and every assumption made from a thin brief, labelled.

2. Physical risk register — table: hazard | type (acute/chronic) | exposure | vulnerability | rating per horizon × scenario | confidence.

3. Transition risk register — same structure across policy, market, technology, and reputation risks (include transition opportunities where real).

4. Financial impact summary — the top 5 risks with impact ranges, confidence, and which scenario/horizon drives each.

5. Adaptation options — per material risk: option, category, cost direction, decision-by date.

6. Monitoring triggers — observable signals (regulation drafts, insurance repricing, hazard events) that should force a reassessment.

Include this line in the artifact: "Verify scenario selection, disclosure use, and any figures intended for reporting against the applicable standard/regulation (e.g. ESRS E1, TCFD/ISSB) with your compliance team; use engineering-grade studies before capital decisions."

Quality Checks

• [ ] Every risk decomposes into hazard, exposure, and vulnerability — no monolithic "climate risk" entries
• [ ] All three horizons and at least two labelled scenarios are covered, and the driver of each rating is stated
• [ ] Every financial estimate is a range with a confidence label and a reason for that confidence
• [ ] Transition and physical risks are assessed separately and both appear in the top-risks summary
• [ ] Each material risk has at least one adaptation option with a decision-by date
• [ ] Assumptions and monitoring triggers are explicit enough for a future reassessment

Anti-Patterns

• [ ] Do not give point estimates for long-horizon losses — ranges with confidence, always
• [ ] Do not assess only one scenario — a single pathway hides either transition or physical risk
• [ ] Do not conflate hazard with risk — a flood map is not a loss estimate until exposure and vulnerability are in
• [ ] Do not let 2050 risks crowd out 2030 decisions — state what must be decided this planning cycle
• [ ] Do not present this as an engineering, actuarial, or compliance-grade study — it structures judgment, it does not replace specialist analysis

Based On

TCFD/ISSB and ESRS E1 climate-risk practice (physical/transition split, scenario analysis, hazard–exposure–vulnerability structure).