Financial economics and macro-finance

Process

Financial economics and macro-finance: Hazard, exposure, vulnerability

In IPCC AR6 Working Group II, climate risk results from interactions between hazards and a system’s exposure and vulnerability, and responses can add risk.

1. 01 Drivers

   1. 01HazardDataset · Competent authorityThe potential occurrence of a natural or human-induced physical event or trend that may harm people, property, services or ecosystems.
   2. 02ExposureDataset · Competent authorityThe presence of people, livelihoods, species, ecosystems, infrastructure or assets in places and settings that could be adversely affected.
   3. 03SensitivityDataset · Competent authorityThe degree to which a system or species is affected, either adversely or beneficially, by climate variability or change.
   4. 04Capacity to cope and adaptDataset · Competent authorityThe ability of systems, institutions, humans and other organisms to adjust to damage, take opportunities or respond to consequences.

2. 02 Assessment

   1. 05Risk from responsesComponent · Competent authorityRisks from climate responses arise when responses miss their objectives, or from trade-offs or negative side effects.
   2. 06VulnerabilityComponent · Competent authorityThe propensity or predisposition to be adversely affected. It includes sensitivity to harm and lack of capacity to cope and adapt.
   3. 07RiskModel · The Global Centre for Risk and InnovationRisk results from dynamic interactions between hazards and the system’s exposure and vulnerability. Each may be uncertain and change.

3. 03 Response

   1. 08Risk management and responseStep · Competent authorityRisk management is plans, actions, strategies or policies that reduce the likelihood or size of adverse consequences.
   2. 09Residual riskRecord · Competent authorityThe climate impact risk that remains after adaptation and mitigation efforts. Adaptation can redistribute risk between areas and groups.

4. 04 Decision

   1. 10Decision by the responsible partyDecision · Competent authorityThe framing names no single decision maker. Decisions on responses rest with the responsible party under its own rules.

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