Last verified: 8 September 2026. Children: physical · transition / stranded assets · scenario analysis.
Direct Answer: Climate risk is the financial and operating effect of a changing climate and of the policy and market response to it. Physical is acute (flood, wind, heat, fire) and chronic (sea level, heat load, water). Transition is carbon price, building-performance standards, stranded plant, and refinance questions. For listed and many private groups the investor heading is IFRS S2. Do not treat a GRESB score as a climate-risk assessment.
Worked asset
1970s mid-rise office, ~200,000 sq ft, coastal Northeast, HVAC near end of life.
- Acute physical — flood / wind / heat outage. Recovery on the DR framework.
- Chronic physical — EUI and cooling-plant CapEx. Asset vulnerability.
- Transition — NYC LL97 2030 if in scope; SB 253 / 261 if the parent reports.
- S2 row — this asset is the evidence line. S1/S2 checklist.
| Type | Question | File it with |
|---|---|---|
| Acute physical | What breaks this year in a named storm? | DR + insurance |
| Chronic physical | What plant fails before 2030 from heat or water? | CapEx plan |
| Transition | What cap, tax, or disclosure changes the cash? | LL97 / CSRD / SB 253 |
Official climate disclosure baseline: IFRS S2. Scenario language used by supervisors: NGFS. Do not invent a third climate encyclopedia on this slug.
FAQ
What is the difference between physical and transition risk?
Physical is weather and climate acting on the asset. Transition is policy, technology, and markets acting on the cash flows of that asset.
Are stranded assets a climate topic?
Yes, on the transition side: plant or fuel that cannot earn its remaining book under a tighter cap or carbon price. Desk: stranded assets.
Does ISSB replace TCFD?
The TCFD task force closed. S2 carries the four pillars. Keep the headings; change the cover sheet.