Certified Environmental Social and Governance Analyst (CESGA) EFFAS Practice Test

According to the TCFD, which are climate-related risks?

1. Policy and legal transition risks.

2. Acute physical risks.

3. Chronic physical risks.

4. All answers are correct.

The correct answer is: All answers are correct.

The Task Force on Climate-related Financial Disclosures (TCFD) identifies multiple categories of climate-related risks that organizations need to consider in their reporting and strategic planning. These categories encompass a broad range of challenges that can significantly impact businesses and their stakeholders. Policy and legal transition risks arise from the changing regulatory environment as governments implement measures to mitigate climate change. This can include new laws, regulations, or policies aimed at reducing greenhouse gas emissions, which can create financial implications for organizations that must adapt to these changes. Acute physical risks are those associated with extreme weather events, such as hurricanes, floods, and wildfires. These events can cause immediate and severe damage to infrastructure, operations, and supply chains, affecting an organization's ability to function and generate revenue. Chronic physical risks, on the other hand, relate to long-term changes in climate patterns, such as rising sea levels or persistent droughts. These changes can have gradual but profound impacts on resource availability and operational viability, posing ongoing challenges for organizations in the affected areas. Recognizing that both transition risks and physical risks (both acute and chronic) are essential components of the overall climate-related risk landscape justifies why the correct answer encompasses all of these factors. By acknowledging all categories of climate-related risks, organizations