CCP Climate Change Risk Assessment & Management 3 — Questions and Answers
Question 1: Which qualitative risk assessment method uses structured expert judgment to systematically explore how climate change could disrupt a system?
- Monte Carlo simulation
- Failure Mode and Effects Analysis (FMEA)
- Delphi method scenario workshop (Correct answer)
- Probabilistic hazard modeling
Correct answer: Delphi method scenario workshop
A Delphi-method scenario workshop gathers iterative expert input to build consensus on plausible future climate risk pathways.
Question 2: Under the TCFD framework, 'transition risks' primarily arise from:
- Physical damage caused by extreme weather events
- Policy, legal, technology, and market shifts toward a low-carbon economy (Correct answer)
- Sea level rise threatening coastal infrastructure
- Increased frequency of drought events
Correct answer: Policy, legal, technology, and market shifts toward a low-carbon economy
Transition risks stem from the process of adjusting to a lower-carbon economy, including policy changes, technology shifts, and changing market preferences.
Question 3: A municipality uses a 'risk heat map' to prioritize adaptation actions. A risk with HIGH impact but LOW probability would typically be treated how?
- Accepted without action
- Monitored and contingency-planned for (Correct answer)
- Immediately addressed with maximum resources
- Transferred to a federal agency
Correct answer: Monitored and contingency-planned for
High-impact, low-probability risks are typically flagged for monitoring and contingency planning rather than immediate intensive action.
Question 4: What is the primary purpose of a 'climate stress test' applied to financial institutions?
- To measure carbon emissions from lending portfolios
- To assess whether a bank can remain solvent under severe climate scenarios (Correct answer)
- To determine ESG ratings for disclosure purposes
- To calculate stranded asset values in existing portfolios
Correct answer: To assess whether a bank can remain solvent under severe climate scenarios
Climate stress tests evaluate whether financial institutions have sufficient capital to absorb losses under adverse physical or transition climate scenarios.
Question 5: Which Representative Concentration Pathway (RCP) scenario represents the highest greenhouse gas emissions trajectory used in IPCC assessments?
- RCP 2.6
- RCP 4.5
- RCP 6.0
- RCP 8.5 (Correct answer)
Correct answer: RCP 8.5
RCP 8.5 represents a high-emissions 'business as usual' pathway with radiative forcing reaching 8.5 W/m² by 2100.
Question 6: In climate risk assessment, 'sensitivity' refers to:
- The degree to which a system is affected by climate stimuli (Correct answer)
- The probability of a climate hazard occurring
- The capacity of a system to recover after a climate event
- The geographic exposure of a system to hazards
Correct answer: The degree to which a system is affected by climate stimuli
Sensitivity is the degree to which a system is affected—positively or negatively—by climate-related stimuli, independent of adaptive capacity.
Question 7: A company identifies that carbon pricing regulations may render its fossil-fuel assets unprofitable before the end of their operational lifespan. These assets are called:
- Residual risks
- Stranded assets (Correct answer)
- Transition liabilities
- Legacy emissions
Correct answer: Stranded assets
Stranded assets are investments that lose economic value ahead of schedule due to regulatory, market, or environmental changes linked to the energy transition.
CCP Climate Change Risk Assessment & Management 3
Which qualitative risk assessment method uses structured expert judgment to systematically explore how climate change could disrupt a system?