The Official Journal of the Pan-Pacific Association of Input-Output Studies (PAPAIOS)
Table 1 Distinction between physical and transition climate change risks
From: Physical climate change and the sovereign risk of emerging economies
Risk type | Implications for credit | Implications for markets | Implications for business |
|---|---|---|---|
Physical | Increasing flood risk to mortgage portfolios; declining agricultural output; increasing default rates | Severe weather events can lead to re-pricing of sovereign debt | Severe weather events can impact business continuity |
Transition | Tightening efficiency standards impact property exposures; stranded assets impair loan portfolios; disruptive technology leads to auto finance losses | Tightening climate-related policy leads to re-pricing of securities and derivatives | Changing sentiment on climate issues leads to reputational risks |