Climate risk analysis

A climate risk analysis assesses the impact of climate-related risks, such as physical damage due to extreme weather events or regulatory changes, on companies. It serves as a basis for strategic decisions to minimize these risks and adapt to climate change.

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One climate risk analysis is a systematic process for identifying, evaluating and prioritizing risks arising from climate change. These risks fall into two main categories:

1. Physical risks:
   These include direct damage due to climatic changes such as storms, floods, droughts or rising temperatures. For example, supply chains can be interrupted, production sites endangered, or insurance costs can rise.
2. Transitory risks:
   These result from the transition to a low-carbon economy and include regulatory changes (e.g. CO₂ pricing, CBAM), market changes, technological developments and loss of reputation.

The analysis is carried out in several steps:

• Risk assessment: Identification of relevant physical and transitory risks based on locations, business areas and value chains.
• Scenario analysis: Simulate worst-case and best-case scenarios to quantify the impact of these risks
• Action planning: Development of strategies to reduce and adapt to identified risks.

The results of a climate risk analysis are increasingly being incorporated into sustainability reports (e.g. in accordance with CSRD or TCFD) and strategic corporate decisions to ensure long-term resilience and competitiveness.

For manufacturing companies, climate risk analysis is crucial to meet regulatory requirements such as the Corporate Sustainability Reporting Directive (CSRD) and the EU taxonomy to fulfill. These regulations require detailed reporting on climate-related risks and their management.