Climate risk

Climate risk is the potential for problems for societies or ecosystems from the impacts of climate change.IPCC, 2022: Annex II: Glossary [Möller, V., R. van Diemen, J.B.R. Matthews, C. Méndez, S. Semenov, J.S. Fuglestvedt, A. Reisinger (eds.)]. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 2897–2930, The assessment of climate risk is based on formal analysis of the consequences, likelihoods and responses to these impacts. Societal constraints can also shape adaptation options. There are different values and preferences around risk, resulting in differences of risk perception.Ara Begum, R., R. Lempert, E. Ali, T.A. Benjaminsen, T. Bernauer, W. Cramer, X. Cui, K. Mach, G. Nagy, N.C. Stenseth, R. Sukumar, and P. Wester, 2022: Chapter 1: Point of Departure and Key Concepts. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 121–196, doi:10.1017/9781009325844.003.

Common approaches to risk assessment and risk management strategies are based on analysing hazards. This can also be applied to climate risk although there are distinct differences: The climate system is no longer staying within a stationary range of extremes. Hence, climate change impacts are anticipated to increase for the coming decades. There are also substantial differences in regional climate projections. These two aspects make it complicated to understand current and future climate risk around the world. Scientists use various climate change scenarios when they carry out climate risk analysis.

The interaction of three risk factors define the degree of climate risk. They are hazards, vulnerability and exposure. Financial models, such as those that predict the maximum potential loss from natural disasters, often use approaches like the Generalized Pareto Distribution (GPD) to estimate the worst-case financial impacts over time. This is particularly relevant for sectors like insurance, which must account for both the physical and financial risks posed by climate events.

There are various approaches to climate risk management. One example is climate risk insurance. This is a type of insurance designed to mitigate the financial and other risk associated with climate change, especially phenomena like extreme weather.

Understanding the interaction between climate hazards and financial exposure through forecasting is crucial for effective climate risk management, ensuring businesses can adapt and respond effectively to both physical and financial challenges.

Definition The IPCC Sixth Assessment Report defines climate risk is the potential for negative consequences for society or ecosystems from the impacts of climate change. Risk is used mainly to talk about the potential effects of climate change, but it may also result from the measures that we take to respond to those changes. The definition also recognises the different values and preferences that people have towards the human or ecological systems at risk.

Risk assessment is the qualitative and/or quantitative scientific estimation of risks.

Risk perception is the personal judgement that people make about the characteristics and severity of a risk.

Understanding risks

Climate risks are increasingly felt in all regions of the world, and they are especially visible in the growing number of disasters that are driven by climatic events.O'Neill, B., M. van Aalst, Z. Zaiton Ibrahim, L. Berrang Ford, S. Bhadwal, H. Buhaug, D. Diaz, K. Frieler, M. Garschagen, A. Magnan, G. Midgley, A. Mirzabaev, A. Thomas, and R.Warren, 2022: Chapter 16: Key Risks Across Sectors and Regions. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 2411–2538, doi:10.1017/9781009325844.025. Many of these risks and impacts are expected to increase in future, and therefore are an increasing concern. Risk assessments are based on responses of a climate system that is no longer staying within a stationary range of extremes. The Intergovernmental Panel on Climate Change (IPCC) assessment framework is based on the understanding that climate risk emerges from the interaction of three risk factors: hazards, vulnerability and exposure.

In this framework, climate risks are also described in five sets of major risks:

unique and threatened systems extreme weather events distribution of impacts global aggregate impacts large-scale singular events

Risks and uncertainties Risks and uncertainties are closely related concepts. Risk is "the potential" for a negative outcome, so it implies uncertainty or incomplete information. However, risks are more often understood in a more context-specific way. Each component of climate risk - hazards, exposure and vulnerability -  may be uncertain in terms of the magnitude and likelihood of occurrence. Assessment of the risk includes a set of measured uncertainties. These are usually given in terms of a set or range of possible outcomes, which may also include probabilities. The IPCC uses qualitative rating scales for uncertainty which may be based on quantitative results or expert judgement. Susanne Hanger-Kopp, Alexandros Nikas, and Jenny Lieu, (2019), "Framing risks and uncertainties associated with low-carbon pathways." Narratives of Low-Carbon Transitions: Understanding Risks and Uncertainties.

Uncertainty is also used in a broader way to describe general lack of knowledge about the world and of possible outcomes (epistemic uncertainty). Some such outcomes are inherently unpredictable (aleatory uncertainty). It can also refer to different framings or understandings about the world (ambiguity) including different scientific understandings. There are many types of sources of uncertainty. Unlike risk, uncertainty does not always carry negative connotations. Risk is subcategory of uncertainty that is considered to make potential issues and problems more manageable. Risk is a term used widely across different management practice areas. Examples are business, economics, environment, finance, information technology, health, insurance, safety, and security.

Vulnerability

Management Responses to risk Climate change adaptation and climate change mitigation can reduce climate-related risks. These two types of climate action can be complementary and can result in synergies, and thus more successful results.

Climate risk management

Climate risk insurance

Climate Risk Pooling

Disaster risk reduction

By sector Climate risks can be categorised into natural environment, infrastructure, human health, the built environment, business and international.Climate Change Committee (2022), UK Climate Change Risk Assessment 2022, HM Government The IPCC Sixth Assessment Report considers risks within important sectors affected by climate change, like agriculture, water, cities, ecosystems, health and livelihoods. It also considers sets of major risks across these sectors. Risk categories are often assessed in relation to multiple hazards and impacts, but hazard-specific assessments are often also available, eg. flood risk or heatwave risk assessment.

Ecosystems and their services

The main risks to ecosystems from climate change are biodiversity loss, ecosystem structure change, increased tree mortality, increased wildfire, and ecosystem carbon losses. These risks are linked. Loss of species can increase the risks to ecosystem health.Parmesan, C., M.D. Morecroft, Y. Trisurat, R. Adrian, G.Z. Anshari, A. Arneth, Q. Gao, P. Gonzalez, R. Harris, J. Price, N. Stevens, and G.H. Talukdarr, 2022: Terrestrial and Freshwater Ecosystems and Their Services. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 197–377, doi:10.1017/9781009325844.004 Wildfire is an increasing risk for people as well as to ecosystems in many parts of the world. Wildfires and increased pest infestations due to climate change caused much of the recent tree mortality in North America.

Risks to seas and coastal areas include coral bleaching linked with ocean warming. This can change the composition of ecosystems. Coral bleaching and mortality also increase the risks of flooding on nearby shorelines and islands. Ocean acidification attributed to climate change drives change in coral reefs and other ecosystems such as rocky shores and kelp forests.Cooley, S., D. Schoeman, L. Bopp, P. Boyd, S. Donner, D.Y. Ghebrehiwet, S.-I. Ito, W. Kiessling, P. Martinetto, E. Ojea, M.-F. Racault, B. Rost, and M. Skern-Mauritzen, 2022: Oceans and Coastal Ecosystems and Their Services. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 379–550,

Health

Climate change-related risks to health include direct risks from extreme weather such as cold waves, storms, or prolonged high temperatures. There are also indirect risks such as mental health impacts of undernutrition or displacement caused by extreme weather.Cissé, G., R. McLeman, H. Adams, P. Aldunce, K. Bowen, D. Campbell-Lendrum, S. Clayton, K.L. Ebi, J. Hess, C. Huang, Q. Liu, G. McGregor, J. Semenza, and M.C. Tirado, 2022: Health, Wellbeing, and the Changing Structure of Communities. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1041–1170, Similarly there are mental health risks from loss of access to green spaces, reduced air quality, or from anxiety about climate change. There are further risks from changes in conditions for transmission of infectious diseases. Malaria and dengue are particularly climate-sensitive.

Cities