2021

Study Guide
and Learning
Objectives
2021 SCR™ Study Guide and Learning Objectives
TOPIC OUTLINE, READINGS,
TEST WEIGHTINGS
The Study Guide and Learning Objectives document
sets forth the primary topics and subtopics covered in
the SCR Exam. These topics were determined by the
SCR Advisory Committee to be essential for the field
of sustainability and climate risk. The topics and their
respective weightings are reviewed yearly to ensure
the Exam is timely and relevant. The Study Guide and
Learning Objectives document also contains a full list of
all the readings that are recommended as preparation
for the SCR Exam.
Key concepts appear as bullet points at the
beginning of each section and are intended to help
candidates identify the major themes and knowledge
areas associated with that section, and individual
learning objectives are provided for each reading.
Since every SCR Exam question maps to at least
one learning objective, the SCR Study Guide and
Learning Objectives document is an important study
resource and should be referred to regularly during
exam preparation.
2021 SCR Study Guide and Learning Objectives
SCR EXAM APPROACH
The SCR Exam is practice oriented. The questions are
derived from a combination of theory, as set forth
in the readings, and “real-world” work experience.
Candidates are expected to understand sustainability
and climate risk concepts and approaches, as well as
the ways in which they would apply to a candidate’s
day-to-day activities. The curriculum covers the
essential skills and knowledge areas necessary for
individuals and organizations to succeed in today’s
rapidly changing risk-laden landscape.
The SCR constitutes an increasingly referenced and
ever- expanding spectrum of risk-planning standards
from which practitioners can learn and understand
the intricate nature of the sustainability and climate
risk landscape. As such, the Exam is comprehensive
in nature, testing a candidate on a number of sought-
after SCR standards and mechanisms.
READINGS
Questions for the SCR Exam are related to and
supported by the readings listed under each topic
outline. These readings were selected by the SCR
Advisory Committee to assist candidates in their
review of the subjects covered by the Exam. It is
strongly suggested that candidates review these
readings in depth prior to sitting for the Exam. All the
readings listed in the SCR Study Guide are available
through GARP. Further information can be found on
the GARP website.
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SCR Study Modules
MODULE 1:
FOUNDATIONS OF CLIMATE CHANGE:
SCIENCE AND GLOBAL RESPONSE.......................................................................................... 3

MODULE 2:
POLICY, REGULATIONS, AND IMPLICATIONS....................................................................... 6

MODULE 3:
GREEN AND SUSTAINABLE FINANCE:
INSTRUMENTS AND MARKETS................................................................................................... 11

MODULE 4:
CLIMATE RISK MEASUREMENT AND MANAGEMENT.................................................... 14

MODULE 5:
CLIMATE SCENARIO ANALYSIS................................................................................................. 19

MODULE 6:
CURRENT ISSUES IN SUSTAINABILITY AND CLIMATE RISK....................................... 21
Module 1: Foundations of Climate Change:
Science and Global Response
EXAM WEIGHT | 20% (FCC)

TOPICS AND READINGS

This area focuses on foundational concepts of climate change, the underlying science, and global responses.
Knowledge of these concepts is fundamental to understanding the context of policy and regulatory changes and
financial risk implications explored in this program. This module explains various scientific and environmental
processes to make them accessible to readers with and without scientific backgrounds. The knowledge points
covered in Foundations of Climate Change: Science and Global Response include the following:

• Introduction to Earth science systems: greenhouse effect, global warming, and climate change
• Carbon emissions, sequestration, greenhouse gas (GHG) scenarios, and tipping points
• History and evolution of past and present climate accords
• Integrated Assessment Models (IAMs)

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings to
the knowledge points follows in the descriptions below.

The first three chapters cover the basics of climate change. Chapter 1 gives a broad overview of climate science
basics, describing how the different Earth science systems form the foundational basis for understanding climate.
Chapter 2 focuses on the relationship between extreme weather and climate change, along with the associated
effects on the Earth. Lastly, Chapter 3 briefly discusses the role of clean energy, carbon sequestration, and other
methods in reducing atmospheric carbon.

The next two readings (Chapters 4 and 5) describe the history of climate change policy over the past two
centuries, with a focus on the formal and informal international accords. Chapter 4 focuses on the formation
and history up to and including the Kyoto Protocol, while Chapter 5 examines the strengths, challenges, and
opportunities associated with the 2015 Paris Accord.

Chapter 6 presents the Intergovernmental Panel on Climate Change (IPCC) 2013 summary for policymakers, which
explains the complexity of diverse technical climate change assessments to a non-scientific audience. The reading
addresses the various biogeochemical changes caused by climate change and discusses the predictions produced
by different climate models. Lastly, the examples used within the summary are key to understanding how the
science connects with the actions, goals, and programs discussed in later modules.

Chapter 7 introduces IAMs, which integrate the capabilities of several individual models into singular technological
suites. The reading explains how IAMs allow practitioners to create more accurate forecasts than simply using
independent standalone models.

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The readings that you should focus on for this section and the specific learning objectives that should be achieved with
each reading are as follows:

1. Chapter 1: Climate Science Basics (pages 1-15). Romm, J. J.

After completing this reading you should be able to:
• Explain the greenhouse effect and how it warms the Earth.
• Define global warming and explain its relationship to both the naturally occurring and human-enhanced
greenhouse effects.
• Identify and describe the main contributors to sea-level rise.
• Define greenhouse gases and describe their connection to human activity and energy use.
• Describe the impacts of human activity and fossil fuel development on climate patterns and variables.

2. Chapter 2: Extreme Weather and Climate Change (pages 17-35). Romm, J. J.

After completing this reading you should be able to:
• Explain the cyclical, meteorological, and temporal relationships between weather and climate.
• Distinguish between the components of weather, climate, and their interrelationships.
• Interpret how climate change affects precipitation patterns, storm surges, ice melt, and wildfires.
• Describe the impact of climate change on the Arctic.

3. Chapter 3: The Role of Clean Energy (pages 37-41). Romm, J. J.

After completing this reading you should be able to:
• Explain the process of carbon capture and storage and its role in reducing atmospheric CO 2 .
• Describe the state of existing carbon sequestration technologies and the opportunities for their future
development and deployment.

4. Chapter 4: A History of International Climate Change Policy (pages 43-61). Gupta, J.

After completing this reading you should be able to:
• Describe the birth and evolution of climate accords in the late 20th and early 21st centuries.
• Assess the achievements and shortcomings of these agreements.
• Analyze countries’ obligations after joining various climate accords.

5. Chapter 5: The Paris Agreement and the New Logic of International Climate Politics (pages 63-75).
Falkner, R.
After completing this reading you should be able to:
• Compare climate change policies and goals from before the Paris Agreement to those implemented in the
Paris Agreement.
• Identify and analyze the mechanisms in the Paris Agreement to reduce emissions and promote
sustainable development.

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6. Chapter 6: Climate Change 2013: The Physical Science Basis. Summary for Policymakers, Technical
Summary and Frequently Asked Questions (pages 77-100). IPCC - Intergovernmental Panel on
Climate Change.
After completing this reading you should be able to:
• Describe the observed atmospheric, oceanic, carbon cycle, and biogeochemical cycle-based changes
observed within the global climate system.
• Understand the drivers of climate change and explain the relationship between these drivers and the
various cycles and components within the global climate system.
• Evaluate the rationale for the different types of climate models and explain the justification for the models’
varying levels of certainty.
• Assess the attributions of and correlations between human influence on the environment and global
climate change.
• Describe the relationship between sea-level rise and climate stabilization.

7. Chapter 7: Integrated Assessment Models: What Are They and How Do They Arrive at Their Conclusions?
(pages 101-108). Hare, B., Brecha, R., and Schaeffer, M.
After completing this reading you should be able to:
• Describe the uses and limitations of IAMs.
• Identify and explain the three scientific sources of information from which IAMs are derived.
• Explain the benefits of using an IAM approach to guide the fulfillment of the Paris Agreement’s goals.

OPTIONAL READINGS

The readings below provide additional information and perspectives on the topics covered in this module.
However, candidates will not be tested on these readings.

IPCC. Summary for Policymakers. (2018). Global Warming of 1.5°C. An IPCC Special Report on the impacts of
global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in
the context of strengthening the global response to the threat of climate change, sustainable development,
and efforts to eradicate poverty. (pages 1-24).

United Nations. (2019). Summary for policymakers of the global assessment report on biodiversity and
ecosystem services of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem
Services. (pages 1-45).

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Module 2: Policy, Regulations, and Implications
EXAM WEIGHT | 20% (PRI)

TOPICS AND READINGS

This area firstly contextualizes climate risk within the broader setting of sustainability. The module then presents
the responses of financial institutions, regulators, and international bodies to emerging climate risks. These
responses include key frameworks, formulated policies, recommended best practices, and guiding principles.
The knowledge points covered in Policy, Regulations, and Implications include the following:

• Sustainable Development Goals (SDGs)

• Financial stability and climate change
• Environmental, Social, and Governance (ESG) reporting frameworks, scorings, and ratings
• Operating Principles for Impact Management
• Principles for Responsible Investment
• Principles for Responsible Banking
• Climate-related financial disclosures
• Greening the Financial System best practices
• Greenhouse gas (GHG) emissions accounting and reporting principles
• Carbon pricing: taxes, trading, credits, and leakage

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings to
the knowledge points follows in the descriptions below.

Chapter 8 outlines the 17 United Nations SDGs, which serve as a universal framework for achieving sustainability.
Chapter 9 explores the interdependencies of the 17 SDGs and provides six operational transformations that can
be used as modular building-blocks of SDG achievement. Each transformation organizes key SDG interventions to
be undertaken by stakeholders in government working with business and civil society to achieve SDG outcomes.
Chapter 10 then views sustainability through a different lens by focusing on climate and highlighting the systemic
financial risk that climate change brings. Green swan risks are potentially, extremely financially disruptive events
that could be behind the next financial crisis. The reading gives a holistic perspective on how climate change
impacts financial, monetary, and socioeconomic stability.

The next reading (link available on the GARP website) subdivides the sustainability topic into environmental,
social, and governance factors. Institutional investors, asset managers, financial institutions, and other
stakeholders increasingly rely on ESG performance in assessing and comparing firms. The reading describes
various organizations and ESG data providers that have developed methodologies for scoring and rating
corporations and sectors in the spirit of good governance and transparency. Chapter 11 outlines a set of principles
that provide a framework for impact investing, guiding investors on designing a robust impact management
system, and establishing a reference point against which the impact management systems of funds and
institutions may be assessed. Chapters 12 and 13 also put forth principles that institutional investors and banks
should follow in order to align their strategies and practices with the SDGs.

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Financial reporting is another means of understanding company specific ESG performance. Chapter 14 examines
the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) with regard to climate-
related reporting. It explains how both financial and non-financial sectors would gain from proper disclosure and
outlines the steps for effective climate-related risks disclosure.

Chapter 15 presents the recommendations of the NGFS on how central banks, supervisors, policymakers, and
financial institutions can better manage climate-related risks. These recommendations reflect the best practices
identified by NGFS members to facilitate the role of the financial sector in achieving the objectives of the Paris
Agreement. Continuing the theme, Chapter 16 discusses the role of central banks and financial regulators (CBFRs)
in greening the financial system and reducing climate risk. It covers the wide range of tools and instruments at the
CBFRs’ disposal to aid in the transition to a climate-friendly economy and suggests possible actions for the CBFRs
to address climate-related shocks.

Chapter 17 gives an overview of generally accepted GHG accounting and reporting principles that serve as
a global standard to ensure that an entity’s reported information represents a true and fair account of the
company’s emissions. Chapter 18 illustrates the two approaches that companies can use in consolidating GHG
emissions with respect to organizational or legal structure. Chapter 19 addresses the identification of GHG
emissions associated with a firm’s operations and introduces the three “scopes” approach (Scopes 1, 2, 3) for
transparent GHG accounting and reporting.

Chapter 20 provides a macro view of GHG emissions and tackles the performance and effectiveness of carbon
pricing, such as through carbon taxes and emission trading systems (ETS), in the pursuit of cost-effective GHG
emission reduction for national and regional territories.

The readings that you should focus on for this section and the specific learning objectives that should be achieved with
each reading are as follows:

8. Chapter 8: Business Reporting on the SDGs: An Analysis of the Goals and Targets (pages 111-117). GRI and
UN Global Compact.
After completing this reading you should be able to:
• Describe the United Nations SDGs and their specific targets.

9. Chapter 9: Six Transformations to Achieve the Sustainable Development Goals (SDGs) (pages 119-132).
Sachs, J., Schmidt-Traub, G., Mazzucato, M., Messner, D., Nakicenovic, N., and Rockstrom, J.
After completing this reading you should be able to:
• Describe the six SGD transformations considered to be the modular building blocks of SDG achievement.
• Explain the key principles which shaped the design of the SDG interventions.
• Describe the rationale for each transformation, their key interventions, and how they contribute to the
achievement of SDG outcomes.
• Describe the proposed four major governance mechanisms to design and operationalize the six
SDG transformations.
• Explain the four-point action agenda for the scientific community to generate the knowledge required for
designing, implementing, and monitoring the SDG transformations.

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10. Chapter 10: The Green Swan (pages 133-145). Bolton, P., Despres, M., Pereira Da Silva, L., Samama, F., and
Svartzman, R.
After completing this reading you should be able to:
• Explain the green swan concept and its key characteristics in the context of the climate emergency.
• Describe how climate change can be a severe threat to ecosystems, societies, and economies.
• Describe the redistributive effects of climate change.
• Explain how climate change can be a source of both monetary and financial instability.

* Huber, B. M., Comstock, M., Davis Polk and Wardwell LLP. (27 July 2017). ESG Reports and Ratings:
What They Are, Why They Matter. Harvard Law School Forum on Corporate Governance and Financial
Regulation. (pages 1-14).
After completing this reading you should be able to:
• Compare the methodologies, scope, and coverage of existing ESG reporting and rating providers.

11. Chapter 11: Investing for Impact: Operating Principles for Impact Management (pages 147-150).
International Finance Corporation and The World Bank Group.
After completing this reading you should be able to:
• Define impact investing.
• Identify the elements of the end-to-end impact investment management process and the corresponding
Principles that fall under each element.
• Describe the nine principles that form the key building blocks of a credible impact management system
and the recommended guidance for each.

12. Chapter 12: Principles for Responsible Investment (pages 151-154). PRI.
After completing this reading you should be able to:
• Describe how responsible investment approaches consider ESG issues with investment decision-making
and ownership practices.
• Identify the six principles of responsible investment and potential ways to achieve them.

13. Chapter 13: Principles for Responsible Banking (pages 155-173). PRB.
After completing this reading you should be able to:
• Explain the requirements and suggested measures to take for each principle of responsible banking.
• Understand and describe how banks have implemented the responsible banking principles, along with the
benefits of implementing these principles.

* See Required Readings under the SCR Study Materials found at: https://www.garp.org/#!/scr/study-materials

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14. Chapter 14: Recommendations of the Task Force on Climate-Related Financial Disclosures (pages
175-186). TCFD.
After completing this reading you should be able to:
• Identify the scope of coverage of the TCFD recommendations.
• Describe the necessary principles to follow for effective TCFD implementation.
• Identify the four core elements of climate-related financial disclosure and the recommended types of
information that should be disclosed or considered for each.
• Identify the financial and non-financial industries for which supplemental guidance was developed.

15. Chapter 15: A Call for Action (pages 187-192). NGFS.

After completing this reading you should be able to:
• Describe the six NGFS recommendations for central banks, supervisors, policymakers, and financial
institutions to manage environmental and climate-related risks.
• Explain how the NGFS recommendations can guide the financial sector in achieving the objectives of the
Paris Agreement.

16. Chapter 16: Greening the Financial System (pages 193-207). Climate Bonds Initiative.
After completing this reading you should be able to:
• Describe how central banks and financial regulators (CBFRs) have been adopting the climate change
risk agenda.
• Explain the role of CBFRs in managing climate risk and maintaining stability of the financial industry.
• Examine the CBFRs’ tools and instruments for reducing climate risk and greening the financial system.
• Describe current policies set to help the financial system and aid the transition to a sustainable economy.
• Describe the Climate Bonds Initiative’s (CBI’s) recommended actions for CBFRs to reduce climate risk and
stimulate green investment.

17. Chapter 17: GHG Accounting and Reporting Principles (pages 209-211). World Business Council for
Sustainable Development and World Resources Institute.
After completing this reading you should be able to:
• Describe the generally accepted GHG accounting and reporting principles.

18. Chapter 18: Setting Organizational Boundaries (pages 213-220). World Business Council for Sustainable
Development and World Resources Institute.
After completing this reading you should be able to:
• Explain the two distinct approaches that can be used to consolidate GHG emissions.
• Assess the differences between GHG accounting and GHG reporting when consolidating GHG data.

19. Chapter 19: Setting Operational Boundaries (pages 221-230). World Business Council for Sustainable
Development and World Resources Institute.
After completing this reading you should be able to:
• Explain the concept of boundaries in operational GHG accounting (i.e., Scopes 1, 2, 3).
• Describe the definitional coverage of Scopes 1, 2, and 3, along with their respective roles in delineating
emission sources in GHG accounting.

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20. Chapter 20: Carbon Taxes and Greenhouse Gas Emissions Trading Systems: What Have We Learned?
(pages 231-242). Haites, E.
After completing this reading you should be able to:
• Describe how carbon taxes and emission trading systems contribute to economic efficiency.
• Compare the two types of emission trading systems.
• Explain the issue of carbon leakage.
• Describe and compare different carbon pricing methods.

OPTIONAL READINGS

The readings below provide additional information and perspectives on the topics covered in this module
However, candidates will not be tested on these readings.

Climate Disclosure Standards Board. (2018). Uncharted waters: How can companies use financial accounting
standards to deliver on the Task Force on Climate-related Financial Disclosures’ recommendations?
(pages 2–15).

SASB. (2018). Insurance: Sustainability Accounting Standard (Industry Standard, pages 4–24). Sustainability
Accounting Standards Board.

Bose, S., Bridges, A., and DeFrancia, K. (2019). Carbon Pricing as a Policy Instrument to Decarbonize
Economies (pages 1–44). The Earth Institute at Columbia University and Enel Foundation.

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Module 3: Green and Sustainable Finance:
Instruments and Markets
EXAM WEIGHT | 15% (GSF)

TOPICS AND READINGS

This area focuses on the emergence of financial sector tools and markets born out of the global response to
climate change. The module tests your knowledge of what constitutes “green” finance, existing taxonomies, and
the range of financial products and instruments for financing sustainability and climate projects. The knowledge
points in Green and Sustainable Finance: Instruments and Markets include the following:

• Defining what is “green”

• Existing and emerging global taxonomies
• Green bonds, green loans, and other products
• Climate finance trends, instruments, and sources

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings to
the knowledge points follows in the descriptions below.

Chapter 21 presents a basis for evaluating the definitions of “green” in the context of green finance. It covers the
varying definitions of green instruments across multiple asset classes and sectors.

Chapter 22 identifies a gap in the adoption of green definitions and argues for the development of consistent
approaches toward identifying eligible green and sustainable assets within the taxonomies of China and the EU.
Chapter 23 explores the concept of green finance and financial concepts related to green finance, and describes
green financial products divided into four main banking categories. Chapter 24 compares the definitions and
characteristics of green loans and sustainability-linked loans and their respective principles.

In order to paint a picture of the growing green bond markets, Chapter 25 provides an analysis of the climate-
aligned bond universe and describes the trends in bond issuance for sectors such as clean energy and waste
management. It also provides a timely overview of the diversity of green bond structures.

Currently, green bond guidelines are being implemented across the globe to support issuers and investors in
selecting and reporting on suitable projects. Chapters 26, 27, and 28 describe the principles for green, social, and
sustainability bonds and provide guidance on their issuance and best uses.

Finally, Chapter 29 explores climate finance and the current state of global climate flows. It provides an analysis on
the global flow of financing toward low-carbon and climate-resilient actions globally and includes findings on the
funding sources for climate mitigation and adaptation projects.

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The readings that you should focus on for this section and the specific learning objectives that should be achieved with
each reading are as follows:

21. Chapter 21: Defining “Green” in the Context of Green Finance (pages 245-259). Kahlenborn, W., Cochu,
A., Georgiev, I., Eisinger, F., and Hogg, D.
After completing this reading you should be able to:
• Describe the existing global approaches to defining “green” in the context of green finance.
• Evaluate definitions of “green” for targeted and untargeted financing, including green bonds, green
lending, green listed equity, green equity indices, and green themed funds.

22. Chapter 22: Comparing China’s Green Bond Endorsed Project Catalogue and the Green Industry Guiding
Catalogue with the EU Sustainable Finance Taxonomy (Part 1) (pages 261-270). Climate Bonds Initiative.
After completing this reading you should be able to:
• Describe the EU Sustainable Finance Taxonomy.
• Compare the guiding principles, users, classifications, and screening criteria among the various
green taxonomies.
• Compare the EU Taxonomy with the Industry and Project Catalogue in terms of scope and
environmental objectives.

23. Chapter 23: Financial Strategy to Accelerate Green Growth (pages 271-276). Noh, H.J.
After completing this reading you should be able to:
• Describe green growth, green finance concept and financial concepts related to green finance.
• Describe the green financial products.

24. Chapter 24: 8 Things You Need to Know About: Sustainable Finance (pages 277-279). LSTA.
After completing this reading you should be able to:
• Describe the sustainability-linked loan principles set forth by the LSTA, LMA, and APLMA.
• Describe the green loan principles set forth by the LSTA, LMA, and APLMA.
• Distinguish between green loans and sustainability-linked loans.
• Explain the state of the green and sustainable loan markets.

25. Chapter 25: Bonds and Climate Change (pages 281-320). Filkova, M.
After completing this reading you should be able to:
• Describe the landscape of climate-aligned outstanding bonds.
• Identify opportunities and uses for green bond issuance.
• Differentiate between the different green bond structures.
• Assess the market for green bonds, green bond issuance, and green bond issuers.
• Describe current public sector developments in green bond issuance and standards.

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26. Chapter 26: Green Bond Principles (pages 321-326). ICMA - International Capital Markets Association.
After completing this reading you should be able to:
• Explain the definition and purpose of a green bond.
• Explain the core components of the Green Bond Principles.
• Identify the types of projects green bonds are used for in the global market.
• Describe the types of green bond external review providers.

27. Chapter 27: Social Bond Principles (pages 327-332). ICMA - International Capital Markets Association.
After completing this reading you should be able to:
• Explain the definition and purpose of a social bond.
• Explain the core components of the Social Bond Principles.
• Identify the types of projects social bonds are used for in the global market.
• Describe the types of social bond external review providers.

28. Chapter 28: Sustainability Bond Guidelines (pages 333-334). ICMA - International Capital
Markets Association.
After completing this reading you should be able to:
• Describe the hybrid nature and definition of sustainability bonds.

29. Chapter 29: Global Landscape of Climate Finance 2019 (pages 335-362). Buchner, B., Clark, A., Falconer,
A., Macquaire, R., Meattle, C., Tolentino, R., and Wetherbee, C.
After completing this reading you should be able to:
• Describe the current state of international climate finance flows.
• Identify the sources of climate finance and the financial instruments that drive investment in low-carbon
and climate-resilient projects.
• Describe the current private climate finance trends.
• Describe the current public climate finance trends.
• Describe the current trends in the mitigation and adaptation sectors of global climate finance.
• Describe the current trends in the geographic climate finance flows.

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Module 4: Climate Risk Measurement
and Management
EXAM WEIGHT | 20% (CRMM)

TOPICS AND READINGS

This module focuses on the risks from climate change and the approaches for measuring and managing these
risks. The knowledge points in Climate Risk Measurement and Management include the following:

• Climate transmission channels

• Physical risks and opportunities
- Acute
- Chronic
• Transition risks and opportunities
- Policy and legal
- Technology
- Market
- Reputational
• Manifestation in traditional risk types
• Climate change risk governance
• Risk management: ESG and sustainability
• Approaches to measuring climate-related risks
• Credit risk assessment and measurement
• Climate-related metrics and tools

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings to
the knowledge points follows in the descriptions below.

Climate change can result in financial risk impacts for organizations. The financial risks from climate change arise
through two primary channels: physical and transition. Chapter 30 introduces the physical and transition risks
and opportunities that can arise from climate change. The reading explains how these climate-related risks and
opportunities can impact an organization’s future financial position, as reflected in its income statement, cash flow
statement, and balance sheet. Chapter 31 further explores how transition and physical risk can affect different
types of firms and explains how climate risk is a “transverse risk.”

Practitioners need to consider how climate-driven financial risks can be embedded into current financial risk
management frameworks. Chapter 32 explores the different aspects of risk management that are impacted by
climate change and how firms can incorporate financial risks from climate change into existing risk management
practice. Chapter 33 discusses the ways in which climate change affects banks’ borrowers and the financial
performance of various sectors, along with the steps banks can take to evaluate climate risk in loan portfolios.
The reading also describes the role of insurance as a risk mitigant, and the climate change impacts on real estate
default probabilities and loan-to-value ratios.

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Chapter 34 explores the manifestation of climate risk in traditional risk types, explains how climate risks translate
into credit risk, and describes the challenges in estimating the credit risk impact of climate change. Chapter 35
introduces the concept of “stranded assets” and the causes of asset stranding, as well as the approaches that can
be used to manage the risk of stranded assets. Chapter 36 evaluates exposures to carbon risk and the financial
impacts of carbon asset risk.

Chapter 37 describes the climate-related risks and opportunities of which boards need to be made aware. The
reading explains how trustees and boards can obtain information about climate-related risks that a portfolio is
exposed to and the climate change risks that boards need to manage. Various climate-related metrics and tools
to assess portfolio alignment with a less-than 2°C scenario are also described. Chapter 38 focuses on the various
ESG-related risks that may impact an entity and the investor interest in ESG-related risks. The reading explores
how Enterprise Risk Management (ERM) principles and practices can be applied to manage ESG-related risks and
describes the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO’s) Enterprise Risk
Management Framework.

A discussion of the responsibilities of companies and directors in relation to climate change follows in Chapter 39.
The possible liability issues concerning the TCFD recommendations and the legal barriers to TCFD-compliance
are further explored. Chapter 40 describes the range of available methodologies to assess climate risks and
opportunities. A discussion of the metrics and approaches that can support investors and asset managers for
integrating climate considerations into investment decisions follows. Recommendations for investors seeking to
implement climate-related risk measurement are analyzed, as are processes for screening climate-related risks.

The readings that you should focus on for this section and the specific learning objectives that should be achieved with
each reading are as follows:

30. Chapter 30: Implementing the Recommendations of the Task Force on Climate-Related Financial
Disclosures (pages 365-377). TCFD.
After completing this reading you should be able to:
• Identify and describe the physical and transition climate-related risks.
• Describe the opportunities for organizations that can arise from climate change.
• Describe how climate-related risks and opportunities can impact an organization’s future financial position
as reflected in its income statements, cash flow statements, and balance sheet.

31. Chapter 31: Climate Risk Management at Financial Firms (pages 379-387). Paisley, J., and Nelson, M.
After completing this reading you should be able to:
• Explain how climate risk is a transverse risk.
• Explain how transition risks and physical risks can affect firms and lead to financial risk.

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32. Chapter 32: Enhancing Banks’ and Insurers’ Approaches to Managing the Financial Risks From Climate
Change (pages 389-392). Bank of England: Prudential Regulation Authority.
After completing this reading you should be able to:
• Explain how climate change could be incorporated into the different aspects of risk management, such as
risk identification, measurement, and monitoring.

33. Chapter 33: Navigating a New Climate (pages 393-406). Connell, R., Firth, J., Baglee, A., Haworth, A.,
Steeves, J., Fouvet, C., and Hamaker-Taylor, R.
After completing this reading you should be able to:
• Explain how climate change can directly and indirectly affect banks’ borrowers and the financial
performance of various sectors.
• Describe how banks can evaluate climate risk in loan portfolios.
• Assess the role of insurance as a risk mitigant for extreme climate and weather events.
• Explain the climate-related changes in sector productivities and their impacts on default probabilities.
• Analyze climate change impacts on loan-to-value ratios using real estate methodology.

34. Chapter 34: Integrating Climate Risks into Credit Risk Assessment (pages 407-418). Monnin, P.
After completing this reading you should be able to:
• Explain how climate risks translate into credit risks.
• Describe the methodological challenges in estimating the credit risk impact of climate change.
• Illustrate the economic impact of various climate change scenarios and low-carbon economy transition
scenarios on debtors.

35. Chapter 35: Stranded Assets: A Climate Risk Challenge (pages 419-442). Caldecott, B., Harnett, E.,
Cojoianu, T., Kok, I., and Pfeiffer, A.
After completing this reading you should be able to:
• Describe the concept and causes of asset stranding.
• Describe the approaches to managing the risk of stranded assets.

36. Chapter 36: Carbon Asset Risk: Discussion Framework (pages 443-465). WRI and UNEP-FI Portfolio
Carbon Initiative.
After completing this reading you should be able to:
• Describe exposures to carbon risk at the sector and company level.
• Explain the process for evaluating the financial impacts of carbon asset risks.
• Illustrate the pathways toward managing carbon asset risk and the roles of various stakeholders.

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37. Chapter 37: Addressing Climate Risks and Opportunities in the Investment Process (pages 467-
492). IIGCC.
After completing this reading you should be able to:
• Illustrate the link between climate change and fiduciary duty.
• Identify the transition risks and physical risks of climate change that boards need to manage.
• Describe the metrics and tools for assessing the carbon footprint of a portfolio alignment with a less than
2°C scenario.

38. Chapter 38: Applying Enterprise Risk Management to Environmental, Social and Governance-Related
Risks (pages 493-503). COSO and WBCSD.
After completing this reading you should be able to:
• Explain the various ESG-related risks that may impact an organization.
• Describe investor interest in ESG-related risks.
• Explain how ERM principles and practices can be applied to manage ESG-related risks.

39. Chapter 39: Concerns Misplaced: Will Compliance with the TCFD Recommendations Really Expose
Companies and Directors to Liability Risk? (pages 505-513). Staker, A., Garton, A., and Barker, S.
After completing this reading you should be able to:
• Describe the liability issues concerning the TCFD recommendations and assess the legal barriers to
TCFD compliance.

40. Chapter 40: Measuring Climate-Related Risks in Investment Portfolios (pages 515-530). Swiss
Sustainable Finance.
After completing this reading you should be able to:
• Illustrate the range of available methodologies for assessing climate risks and opportunities.
• Describe the metrics and approaches that can support investors and asset managers in integrating
climate risks and opportunities into their investment decisions.
• Describe the recommendations for investors seeking to implement climate-related risk measurement.
• Explain the process for screening climate-related risks.
• Calculate the three common climate-related risk metrics used to measure either a portfolio’s carbon
impact or carbon exposure.

OPTIONAL READING:

The reading below provides additional information and perspectives on the topics covered in this module.
However, candidates will not be tested on this reading.

Connell, R., Firth, J., Baglee, A., Haworth, A., Steeves, J., Fouvet, C. F., and Hamaker-Taylor, R. (2018).
Navigating a New Climate - Assessing credit risk and opportunity in a changing climate: Outputs of a working
group of 16 banks piloting the TCFD Recommendations. Finance UNEP Initiative (pages 29–52).

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Module 5: Climate Scenario Analysis
EXAM WEIGHT | 15% (CSA)

TOPICS AND READINGS

This module focuses on the development and application of climate scenario analysis, the types of scenarios
that exist, and what information they can provide. The knowledge points in Climate Scenario Analysis include
the following:

• Climate scenario development

• Developing and applying scenario analysis
• Transition and physical climate scenarios

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings to
the knowledge points follows in the descriptions below.

Scenario analysis evaluates a range of hypothetical outcomes by considering plausible future scenarios under
specific assumptions and constraints. Climate scenario analysis allows organizations to explore an understanding
of how climate-related risks and opportunities may impact a business over time. Chapter 41 describes how
organizations use climate-related scenario analysis. It explores how to develop and apply scenario analysis, how
to build climate change into scenario analysis, the required tools and data, and the challenges and benefits to
performing scenario analysis. The reading also provides an overview of the common climate-related scenarios
(e.g., “transition scenarios” and “physical climate scenarios”) used by the international scientific community.

A guide for institutional investors on climate scenario analysis shapes Chapter 42. The objectives of scenario
analysis and the financial risks and opportunities of the various approaches of scenario analysis are explored.
The methodologies that seek to use scenarios as a basis for analyzing investments are described, followed by a
discussion on the range of actions that investors may consider after reviewing scenario outcomes.

Chapter 43 explains how scenarios are used for transition risk assessment. The three main methods of modeling
transition risk are identified and described and are followed by a discussion of lessons learned from bank piloting,
supported by case studies and results. Lastly, an evaluation of transition opportunities, including opportunity
assessments in scenario analysis and market segment attractiveness, is provided.

Chapter 44 begins with an analysis of incorporating the TCFD recommendations for scenario-based risk
assessment in investors’ financial disclosures. An assessment of the available methodologies for climate-related
scenario analysis, including scenario design and physical and transition risk assessment, follows. The reading then
delineates the process to guide individual investors on how to design and structure the application or the use of
scenario analysis within their own institutions. Lastly, the reading describes the framework to calculate the Climate
Value at Risk® (CVaR) metric for equities, bonds, and real estate assets.

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The readings that you should focus on for this section and the specific learning objectives that should be achieved with
each reading are as follows:

41. Chapter 41: The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities (pages
533-559). TCFD.
After completing this reading you should be able to:
• Define climate-related scenarios and describe how they are used by organizations.
• Explain how to develop and apply scenario analysis, including the considerations for incorporating climate
change into scenario analysis, analytical choices, tools and data, as well as the associated challenges
and benefits.
• Describe some of the common global climate-related scenarios (e.g., transition scenarios and physical
climate scenarios) used by the scientific community.

42. Chapter 42: Navigating Climate Scenario Analysis (pages 561-587). IIGCC.
After completing this reading you should be able to:
• Explain the objectives of scenario analysis.
• Describe reference scenarios and how they are used in investment analysis.
• Illustrate the methodologies that use scenarios as a basis for analyzing investments.
• Discuss considerations when reviewing analysis outcomes and the range of actions that investors may
take after a review.

43. Chapter 43: Extending Our Horizons (pages 589-625). UNEP Financial Initiative.
After completing this reading you should be able to:
• Explain how scenarios are used for assessing transition risk.
• Identify the three main methods of modelling transition risk.
• Describe the lessons learned from bank piloting using case studies and results.
• Evaluate how transition scenario analysis can be used to assess opportunities and segment
market attractiveness.

44. Chapter 44: Changing Course (pages 627-655). UNEP Financial Initiative.
After completing this reading you should be able to:
• Assess the available methodologies for climate-related scenario analysis, including scenario design and
physical and transition risk assessment.
• Delineate the process for designing a scenario analysis for assessing climate risk.
• Describe the framework to calculate the Climate Value at Risk® (CVaR) metric for equities, bonds, and real
estate assets.

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Module 6: Current Issues in Sustainability and
Climate Risk
EXAM WEIGHT | 10% (CI)

TOPICS AND READINGS

This module highlights issues in sustainability and climate risk by sharing current and up-and-coming issues that
are increasingly becoming part of the sustainability and climate risk landscape. The knowledge points in Current
Issues in Sustainability and Climate Risk include the following:

• Mental health and climate change

• Cities and climate resilience
• Natural capital
• Economic impacts of Arctic change
• Flooding and climate change beliefs
• Maladaptation to climate change

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings to
the knowledge points follows in the descriptions below.

Chapter 45 highlights the connections between mental health, social well-being, and a changing climate while
exploring the ways individuals and communities can increase their resiliency. The reading also explains the role of
health leaders in elevating climate leadership.

Chapter 46 frames the role of cities in adapting to and planning for the effects of climate change. In particular,
the reading identifies climate resilience projects and describes the types of funding and financing available for
projects in urban settings. Moreover, the reading illustrates lessons learned from case study examples and the
results obtained from different types of urban adaptation.

Chapter 47 explores the concept of natural capital and how it gives value to the environmental and ecosystem-
based resources that typically have not been considered in past economic analyses. The reading shows
how natural capital analysis can illuminate the connection between these resources and phenomena such as
greenhouse gases, pollution, waste, biodiversity, and toxicity. Chapter 48 focuses on the knock-on effects of a
changing Arctic climate and modifications within the diverse Arctic geography. It explains how some of these
changes can be positive in the short term yet act as a destabilizing force over the longer term.

Chapter 49 discusses community-held beliefs regarding climate change in areas that have experienced flooding
and examines the associations between climate change and future risk perceptions. The reading discusses how
different communities learn and absorb information from prior disasters and how various factors, such as the
length of time between disaster events, can affect those beliefs.

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Lastly, Chapter 50 gives a comprehensive overview of the concept of maladaptation to climate change,
acknowledging that time and scale are important considerations when adapting to a changing climate.
The reading uses studies and scenarios to illustrate five categories of maladaptation and their associated pitfalls.

The readings that you should focus on for this section and the specific learning objectives that should be achieved with
each reading are as follows:

45. Chapter 45: Mental Health and Our Changing Climate: Impacts, Implications, and Guidance (pages
659-687). Clayton, S., Manning, C.M., Krygsman, K., and Speiser, M.
After completing this reading you should be able to:
• Describe the acute and chronic impacts of climate change on individual well-being.
• Illustrate the potential impacts of a changing climate on community and social well-being.
• Describe the tips to support individuals and communities in becoming more resilient.
• Discuss the ways individuals can prepare themselves for the mental health impacts of climate change.
• Discuss the opportunities for health leaders to elevate their climate leadership.

46. Chapter 46: Taking the Heat (pages 689-703). Goldman Sachs and Global Markets Institute.
After completing this reading you should be able to:
• Describe the challenges that major cities face in building climate resilience.
• Illustrate the implementation of climate resilience projects.
• Identify and describe the potential sources of financing for urban adaptation efforts.
• Describe the lessons learned from various case studies and results of financing urban adaptation.

47. Chapter 47: Monetary Natural Capital Assessment in the Private Sector (pages 705-711). Pritchard, R.,
and van der Horst, D.
After completing this reading you should be able to:
• Define and describe natural capital and natural capital risk.
• Identify the value of natural capital assessment for different stakeholders.
• Describe the four main stages of natural capital assessment.
• Explain the roles of impacts and dependencies in a natural capital assessment.
• Discuss how a natural capital assessment, once completed, can be utilized by businesses.

48. Chapter 48: A Framework for Assessing the Economic Impacts of Arctic Change (pages 713-726).
Alvarez, J., Yumashev, D., and Whiteman, G.
After completing this reading you should be able to:
• Describe the framework for assessing the economic impacts of Arctic change.
• Assess the economic impacts, opportunities, and risks associated with a warming Arctic Region.
• Discuss the economic knock-on effects within the Arctic (and the greater globe) due to the impacts of
climate change.

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49. Chapter 49: Beliefs About Climage Change in the Aftermath of Extreme Flooding (pages 727-738).
Albright, E.A., and Crow, D.
After completing this reading you should be able to:
• Assess how climate change-related beliefs are associated with perceptions of future risks.
• Explain how the ability to learn from climate change-related risks is tied to past experiences.
• Identify the factors that affect communities’ beliefs about flooding and climate change.

50. Chapter 50: Maladaptation to Climate Change: Avoiding Pitfalls on the Evolvability Pathway (pages
739-749). UN Environmental Programme.
After completing this reading you should be able to:
• Explain the concept of maladaptation and its application to climate change.
• Identify and assess the five categories of maladaptation and their connection to planning pitfalls.
• Understand how the conceptualization of maladaptation varies by scale or sector.
• Describe the effects of maladaptation on the highlighted climate case studies and warming
planet scenarios.

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2021 SCR Advisory Committee
MEMBERS

Piyush Agrawal Charmian Love

Chief Operating Officer Entrepreneur in Residence
Citibank, N.A. Saïd Business School, Oxford University

Steven Bullock Michael Marano

Global Head of Research Director Energy Products
ESG Analytics and Client Delivery Trucost CME Group

Benjamin Carr William May

Capital Risk Director Global Head, Certifications and
Aviva Educational Programs
GARP
John Colas
Partner and Vice Chairman Financial Julie Pullen
Services Americas Director of Product
Oliver Wyman Jupiter Intelligence

Neha Coulon Corinne Raux

Head of EMEA Capital Strategies Founder and Chief Executive
Sustainable Finance The Environmental and Social
JPMorgan Chase Agency for Financiers

Sandro Diez-Amigo Michael Sheren

Senior Evaluation Officer MIGA Senior Advisor
World Bank Group Bank of England

Beth Gould Creller Jakob Thomä, Ph.D.

SVP, Certifications and Educational Programs Managing Director
GARP 2° Investing Initiative

Novera Khan Michael Wilkins

Chief Risk Officer Managing Director
Uniper S&P Global Ratings

Robert Litterman, Ph.D.

Chairman
Risk Committee Kepos Capital

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