SCR cheat sheet

Weather describes short-term atmospheric conditions over hours to days; climate is the distribution of those conditions over decades or longer.

Radiative forcing is the change in net energy flux at the top of the atmosphere (W/m²) caused by a driver such as CO2, aerosols, or albedo change.

Positive radiative forcing warms; negative forcing cools. CO2 and methane exert positive forcing; sulfate aerosols exert negative forcing.

The greenhouse effect: greenhouse gases absorb outgoing longwave infrared radiation and re-emit it, warming the surface and lower atmosphere.

Global warming potential (GWP) compares the 100-year radiative effect of 1 kg of a gas to 1 kg of CO2; CO2 GWP = 1, methane fossil GWP100 ≈ 29.8 under AR6.

Climate sensitivity: equilibrium climate sensitivity (ECS) is the eventual surface warming from doubling CO2; AR6 best estimate is 3 °C, likely range 2.5–4 °C.

Carbon cycle reservoirs: atmosphere, ocean, land biosphere, and lithosphere; ocean and land currently absorb roughly half of anthropogenic CO2 emissions.

Anthropogenic forcing has warmed the climate at ~0.2 °C per decade in recent decades; AR6 assessed 1.1 °C of warming above 1850–1900 for 2011–2020.

Brundtland definition: sustainable development meets present needs without compromising the ability of future generations to meet theirs.

The three pillars (triple bottom line) are environmental, social, and economic; sustainability requires balancing all three.

Planetary boundaries define nine Earth-system thresholds (e.g., climate change, biosphere integrity, freshwater); several are assessed as transgressed.

Strong sustainability treats natural capital as non-substitutable; weak sustainability permits substitution between natural and human-made capital.

UN Sustainable Development Goals: 17 goals adopted in 2015 with a 2030 target date.

Materiality: an ESG issue is financially material if it can affect enterprise value; double materiality adds impact of the company on society and environment.

Circular economy principles: eliminate waste and pollution, circulate products and materials, regenerate nature; contrasts with take-make-dispose linear models.

TCFD risk taxonomy: physical risk (acute and chronic) and transition risk (policy, legal, technology, market, reputation).

Acute physical risk is event-driven (floods, cyclones, wildfires); chronic physical risk is longer-term shift (sea-level rise, temperature change, precipitation pattern change).

Transition risk arises from the shift to a low-carbon economy; policy and legal, technology, market, and reputational are the four TCFD sub-categories.

Paris Agreement: hold warming well below 2 °C and pursue efforts to limit it to 1.5 °C; parties submit Nationally Determined Contributions (NDCs).

Policy instruments: carbon taxes (price-based), emissions trading systems (quantity-based cap-and-trade), subsidies, standards, and disclosure mandates.

Governance: board oversight of climate risk, management roles and responsibilities, and integration into strategy, risk management, and remuneration.

Stranded assets are assets that lose value ahead of schedule due to transition (e.g., unburnable fossil fuel reserves under a carbon budget).

Green bonds: proceeds earmarked for eligible green projects; use-of-proceeds model with project evaluation, management of proceeds, and reporting.

Sustainability-linked bonds (SLBs): proceeds are general purpose; the issuer commits to sustainability performance targets (SPTs) with a coupon step-up penalty if missed.

ICMA principles: Green Bond Principles, Social Bond Principles, Sustainability Bond Guidelines, and Sustainability-Linked Bond Principles - voluntary frameworks.

Transition finance supports high-emitting sectors to decarbonize; labelled instruments include transition bonds and SLBs with sector-specific KPIs.

Blended finance uses concessional public or philanthropic capital to mobilize private capital in emerging markets.

Taxonomy: the EU Taxonomy is a classification of environmentally sustainable economic activities based on substantial contribution and do-no-significant-harm criteria.

Carbon markets: compliance markets (e.g., EU ETS cap-and-trade) and voluntary markets (credits from avoidance or removal projects, verified under standards such as Verra or Gold Standard).

Risk = f(hazard, exposure, vulnerability); all three components are needed to assess climate risk.

Scenario analysis combines hazards with exposure and vulnerability under a range of warming pathways to estimate potential losses and business impacts.

Physical risk metrics include asset-level hazard maps, expected annual loss (EAL), and value-at-risk (VaR) at chosen return periods (e.g., 1-in-100-year).

Transition risk metrics include carbon intensity (tCO2e per $ revenue), absolute emissions, implied temperature rise, and revenue at risk from carbon pricing.

Climate stress testing applies severe but plausible scenarios to portfolios and business models; regulators (e.g., ECB, PRA) run supervisory exercises.

Risk management cycle: identify, measure, manage (mitigate, transfer, accept, avoid), monitor, and report; integrate into enterprise risk management (ERM).

Insurance and risk transfer (parametric and indemnity products) and adaptation investments are core physical risk management tools.

Integrated assessment models (IAMs) couple economy and climate systems to produce socioeconomic pathways for scenario analysis.

SSP-RCP framework: Shared Socioeconomic Pathways (SSP1–SSP5) describe socioeconomic narratives; Representative Concentration Pathways (RCPs) describe radiative forcing trajectories.

SSP1-1.9, SSP1-2.6, SSP2-4.5, SSP3-7.0, and SSP5-8.5 are commonly used scenario combinations in climate risk analysis.

RCP2.6 is a stringent mitigation pathway; RCP8.5 is a high-emissions pathway; RCP4.5 and RCP6.0 are intermediate.

NGFS scenarios (Net Zero 2050, Below 2 °C, Divergent Net Zero, Delayed Transition, Nationally Determined Contributions, Current Policies) are widely used by financial institutions.

Orderly transition: early, gradual policy action; disorderly transition: delayed or abrupt action with higher transition risk; hot house world: insufficient action, high physical risk.

Scenario analysis is not a forecast; it explores plausible futures to test strategic resilience and identify sensitivities and tipping points.

Net zero means anthropogenic emissions to the atmosphere are balanced by anthropogenic removals over a specified period.

Net zero CO2 is required for stabilizing temperature; net zero GHG emissions (all gases) is needed for stabilizing temperature over longer timescales.

Science Based Targets initiative (SBTi) Corporate Net-Zero Standard requires near-term targets (5–10 years) and long-term net-zero targets by 2050 at latest.

Residual emissions after abatement must be neutralized by permanent removals; offsets are not a substitute for deep emissions reductions.

Carbon budget: cumulative CO2 emissions determine warming; the remaining 1.5 °C budget is small (order of a few hundred GtCO2 from 2020).

Scope 1 = direct emissions; Scope 2 = purchased electricity/heat; Scope 3 = value chain emissions (often the majority for many companies).

Net-zero pledges should cover all scopes, set interim milestones, and include governance, reporting, and periodic review.

Nature-related risks include physical, transition, and systemic risks, plus dependencies and impacts on nature (TNFD LEAP approach).

TNFD LEAP: Locate interface with nature, Evaluate dependencies and impacts, Assess risks and opportunities, Prepare to respond and report.

Biodiversity loss and ecosystem degradation are driven by land/sea use change, overexploitation, climate change, pollution, and invasive species (IPBES).

Nature-related dependencies: businesses rely on ecosystem services such as water regulation, pollination, and raw materials.

Nature-related impacts: business activities change the state of nature, e.g., habitat loss, emissions, water use, and pollution.

Double materiality applies to nature: impacts on nature and dependencies/risks to the business.

Nature and climate are interlinked: forests and oceans are carbon sinks; climate change accelerates biodiversity loss and ecosystem tipping points.

Transition plan: a time-bound, action-oriented strategy to align business model with a low-carbon, climate-resilient economy (e.g., TPT/GFANZ framework).

Transition plan components: ambition and targets, governance, business strategy and levers, financial planning, and metrics and reporting.

GHG Protocol: corporate standard classifies emissions into Scope 1, 2, and 3; Scope 2 has location-based and market-based methods.

GHG Protocol Corporate Standard requires setting an organizational boundary (equity share, financial control, or operational control) and operational boundary.

Emissions = activity data × emission factor; report in tCO2e using GWP factors.

Disclosure regimes: ISSB IFRS S1 and S2 (climate), TCFD-aligned reporting, EU CSRD/ESRS, and national mandates.

Assurance: limited or reasonable assurance over sustainability disclosures increases reliability; internal controls over sustainability reporting are being formalized.