Risk assessment guidance
How do we define physical climate risk?
The potential loss of or damage to a system, society or community caused by a climatic event in a given period of time is what defines physical climate risk (based on the Intergovernmental Panel on Climate Change). Hazard, exposure, and vulnerability are the key drivers of physical climate risk.
Hazard
The hazard component of climate risk refers to the potential occurrence of climate-related events that can cause harm or damage. In the context of climate risk, hazards often refer to extreme weather events such as hurricanes, floods, droughts, heatwaves, and heavy rainfall. The frequency, intensity, and duration of these events can be influenced by climate change, making them more unpredictable and severe.
Hazards can be categorised into acute and chronic. Acute hazards are sudden, severe events that occur over a short period, such as hurricanes, flash floods, and heatwaves. These events can cause immediate and significant damage to infrastructure, ecosystems, and human health. In contrast, chronic hazards develop gradually over a longer period and have persistent effects. Examples include sea level rise, changing wind patterns, and gradual temperature increases. Chronic hazards can lead to long-term changes in ecosystems, water availability, and agricultural productivity, requiring sustained adaptation efforts.
Understanding the nature and likelihood of these hazards is crucial for assessing climate risk and implementing effective mitigation and adaptation strategies to protect communities and ecosystems.
Exposure
The exposure component of climate risk refers to the extent to which people, property, infrastructure, and ecosystems are in harm's way from climate-related hazards. This includes the geographical location and characteristics of the areas at risk, such as coastal regions prone to sea level rise or urban areas susceptible to heatwaves. Exposure is a driver of risk through socio-economic growth. Rapid urbanisation, industrialisation, and population growth have led to increased exposure to climate hazards. For example, the expansion of cities into flood-prone areas and the development of infrastructure without adequate consideration of environmental risks have amplified the potential for damage from extreme events. High exposure areas are those where the potential impact of climate hazards is significant, necessitating targeted measures to reduce risk and enhance resilience.
Vulnerability
Vulnerability is the degree to which a system, community, or individual is susceptible to harm from climate hazards. It encompasses various factors, including social, economic, and environmental conditions that affect the ability to cope with and recover from adverse events. Vulnerability is influenced by aspects such as poverty, health, access to resources, and governance. Communities with limited resources and weak infrastructure are often more vulnerable to climate impacts. Reducing vulnerability involves improving adaptive capacity, strengthening infrastructure, and enhancing social equity to ensure that all groups can effectively respond to and recover from climate-related challenges.
Physical climate risk
Physical climate risk is the product of the hazard, exposure and vulnerability components. It encompasses the likelihood of these hazards occurring and the severity of their consequences for human societies, economies, and ecosystems. Climate adaptation are strategies or measures to reduce the negative impact from physical climate risk. These measures include building and upgrading infrastructure to withstand extreme weather events, such as flood defences and heat-resilient buildings. Another example of climate adaptation involves implementing sustainable agricultural practices to cope with changing precipitation patterns and temperature extremes.
Physical climate risk could pose significant challenges to professionals, impacting business, investments, insurance, and overall financial stability. A climate change risk assessment can support the understanding the climate risk, how governments are taking action to reduce risks on a regional scale, and how much additional climate adaptation efforts are necessary to reduce risk to acceptable levels.
