Climate risk is the term used to describe the possible negative effects that climate change may have on

several facets of the environment, society, and economy. It includes the risks and weaknesses brought on
by alterations in climatic patterns and severe weather occurrences. Risk from climate change can take
many various forms and impact a wide range of industries, including infrastructure, agriculture, water
resources, health, and ecosystems.

Crucial components of climate risk consist of:

1. **Physical Risks:** - **Extreme Weather Events:** More frequent and intense weather events,
including as storms, hurricanes, floods, droughts, and heat waves, can cause actual damage to
infrastructure, fatalities, and community disruptions.
- **Rising Sea Level:** Coastal communities may be at risk from rising sea levels due to erosion,
saline intrusion, and infrastructural damage.

2. **Transition Risks:** - **Policy and Regulatory Changes:** Businesses and industries may be
impacted by changes in government policies and regulations meant to mitigate climate change, such as
carbon pricing or emission reduction objectives.
**Technological Developments:** The value of assets in conventional, carbon-intensive sectors may be
impacted by developments in clean energy technology and shifts in customer preferences.

3. **Financial Risks:** - **Asset Devaluation:** As markets react to climate-related concerns,

investments in fossil fuels or sectors of the economy susceptible to the effects of climate change may lose
value.
Insurance Hazards: The frequency and intensity of extreme weather occurrences are on the rise, which
can put pressure on the insurance market and raise rates.

4. **Social and Economic Risks:** - **Displacement and Migration:** Extreme weather, droughts, and
sea level rise are examples of climate-induced disasters that might drive people to migrate, creating social
and economic difficulties.
- **Food and Water Security:** Variations in precipitation and temperature can have an impact on
agricultural productivity, which in turn can have an impact on the availability of food and water.

5. **Public Perception:** - **Reputational Risks:** If companies and organizations are seen as not doing
enough to confront or adapt to climate change, they may run the danger of damaging their reputation.
In order to manage the effects of climate change both now and in the future, adaptation and resilience
strategies must be combined with efforts to cut greenhouse gas emissions in order to limit the magnitude
of future climate change. Companies, governments, and communities are realizing more and more how
critical it is to identify and manage climate risks in order to promote long-term resilience and sustainable
development.