climate-risk-management-technical-guidance

Climate Risk Management
Guide
Technical Guidance
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Technical Guidance 2
Contents
Introduction 4
What is the Climate Risk and Opportunity Management Program? 4
Who should use this Technical Guidance and why? 4
Navigating this guide 6
Glossary of terms 7
1. Scope the assessment 13

Scoping questions 13
Governance and APS responsibilities 14
Stakeholder engagement methods 14
Stakeholder briefing template 17
2. Consider current and future state 21

Common risk and opportunity drivers 21
Common impact categories 26
3. Identify your risks and opportunities 28

Examples of risk and opportunity statements 28
Complex and shared risks 32
4. Prioritise risks and opportunities 36

Climate scenario analysis 36
Risk prioritisation 50
5. Plan and take action 53

Assessing the suitability of proposed actions 54
Adaptation pathways 55
Mitigation – decarbonisation and abatement options 57
Metrics and targets 60
6. Monitor, evaluate and communicate 61

Periodic review 62
Reporting and assurance 63
7. Disclose 64
Introduction
What is the Climate Risk and Opportunity Management Program?
The Australian Government recognises the increasing In response, the Department of Climate Change,
impacts of climate change on achieving its core Energy, the Environment and Water (DCCEEW) has
objectives for the Australian people and is working to developed the Climate Risk and Opportunity
integrate consideration of climate risk into policy and Management Program. Figure 1 below shows the
decision making. components of the Program and how they work
together to assist Commonwealth organisations in
integrating climate risk and opportunity management
into different types of decisions.
Figure 1: Hierarchy of work packages and resources available through the Program.
This Climate Risk Management Technical Guide, as part of the Climate Risk and Opportunity Management
Program, supports and integrates with whole of Australian Government policies and frameworks including the
Commonwealth Risk Management Policy, Climate Impact Statements, Net Zero in Government Operations
Strategy, Commonwealth Climate Disclosure reform, Mandatory Climate-Related Financial Disclosures, and the
Commonwealth Sustainable Procurement Advocacy and Resource Centre.
Who should use this Technical Guidance and why?

This guide has been developed for any user, including Australian Government employees, tasked with
considering climate risks and opportunities in decision-making processes, as defined in Figure 2 below. It is
designed to be read alongside the Climate Risk Management Application Guides.
This document provides more detailed guidance related to the specific steps of the Climate Risk Management
Guide (‘the Guide’) shown below. It provides more grounding in climate risk and opportunity management
than is found in the Application Guides, offering advanced users with direction on how to apply the Guide in a
greater level of detail where appropriate (e.g. looking at how critical risks could vary across multiple
greenhouse gas emissions scenarios).
Using this document alongside the Climate Risk Management Application Guides is the simplest way to ensure
you are undertaking appropriate climate risk management.
Figure 2: The core steps of the Commonwealth Risk and Opportunity Management Guide and key definitions. ‘Climate risk’
refers to both physical and transition risks.
Navigating this guide
This document is structured around the seven core steps of the Guide. Refer to the relevant section for more
detail when directed by the Climate Risk Management Application Guide you are following. Step 7 – Disclosure
is only relevant to the Organisation Application Guide.
Look out for the following icons designed to help you navigate this technical guide.
Stakeholder engagement
Recommended approach to involving stakeholders from inside and/or
outside your organisation to improve insights around climate risks and
opportunities, and how to manage them.
Additional resources
Links to resources that can assist with completing specific tasks. This is a
mixture of Australian Government and external sources.
Example
Practical examples of specific climate concepts and how to apply them.
All standard templates referenced in this document are available as separate tabs in the Excel Climate Risk
Management Template (hereafter Excel Template). It is optional to use them, but even if using your own
templates, they may provide useful direction on what information to record at a minimum for your assessment.
This will be superseded in future by the Climate Risk Digital Tool currently under development; however, the
Excel file will remain available for those users who are unable to use the Digital Tool for security or other
practical reasons.
Glossary of terms
Technical Guidance
Table 1: Glossary of common terms used throughout this Technical Guidance and other Program materials.
Term Definition
Action Plan A document summarising how climate risks and opportunities will be
addressed. Should include responsible parties, timelines, and an approach
to tracking implementation progress.
Adaptation pathways Sequences of risk treatments arranged over time, which help deal with
future uncertainty and ensure that early actions do not close off options
later. Can also allow space for opportunities that may spontaneously arise
during risk treatments.
Climate adaptation The process of implementing risk treatments to adjust to actual or expected
climate risks. Section 4 describes different types of adaptation.
Climate model A representation of how the Earth’s climate system works that incorporates
the properties and interactions of the atmosphere, oceans, land, and ice to
simulate the climate of the past, present, and future.
Earth system models (ESMs) simulate the entire global climate system but
may work better for some climate attributes (like cloud formation), or in
some regions (like the Arctic) than others. Regional climate models (RCMs)
may be used to model climate in more granular detail for a particular
location.
Climate projection The response of the climate system over the coming decades to an
emissions scenario as simulated by a climate model. Projections provide us
with a sense of the range of future climate conditions that may emerge.
By contrast, a ‘prediction’ aims to describe what will actually happen, like a
weather forecast for tomorrow. A true climate prediction is not currently
possible beyond a few months.
Climate risk drivers Describes the various factors that contribute to modern climate change and
includes both natural and human-induced attributes:
Natural: Includes variations in solar activity (orbit, tilt, and obliquity),
volcanic activity, and year-to-year climate variability associated with
phenomena like the El Niño Southern Oscillation, Indian Ocean Dipole,
Southern Annual Mode, and the North Atlantic Oscillation. See here for
further information: Bureau of Meteorology Home, Water and the Land,
Australian Climate Influences.
Human-induced: Activities that contribute to changing greenhouse gas
emissions such as population growth, urbanisation rates, technological
development, land use changes tied to agricultural activities, composition of
energy generation, and economic growth.
Climate risks Climate risk typically refers to the potential negative impacts that climate
change, and efforts to limit it, can have on the natural environment,
Term Definition
ecosystems, infrastructure, economies, and society. Climate risk is made up
of two primary types physical and transition.
Liability risks can also arise when a person or entity may be held responsible
for not acting sufficiently on physical or transition risks, causing damage to
others.
Consequence The implications – positive or negative – for things of value should a risk
occur.
Control Measures taken to regulate the likelihood or consequence of a risk. May

also be referred to as ‘risk treatments’.
Control effectiveness How well a control is working to regulate the risk it has been designed to
address. The more effective the control is, the greater assurance this
provides an entity that the risk is being managed appropriately.
Emerging risks A newly developing or evolving risk that could affect achievement of an
entity’s strategic objectives. It may be difficult to assess likelihood and/or
consequence of emerging risks.
Emissions scenarios (also Representative estimates of future emissions of greenhouse gases,

referred to as climate aerosols, and other pollutants. There are different publicly available
scenarios) scenarios that can be used to inform climate risk and opportunity
assessments that are developed as part of several initiatives that underpin
the Intergovernmental Panel on Climate Change (IPCC). Emissions scenarios
are used in combination with climate models to produce future climate
projections.
Enterprise risk management A set of components that provide the foundations and organisational
framework arrangements for designing, implementing, monitoring, reviewing and
continually improving risk management throughout an organisation.
Exposure The presence of people, livelihoods, ecosystems, services, resources,

infrastructure, or economic, social, or cultural assets in places and settings
that could be affected by a risk.
Greenhouse gases Natural and human-generated gases in the atmosphere that absorb and
emit radiation at specific wavelengths which affect how much heat is
retained in the atmosphere. The most important greenhouse gases include
water vapour (H2O), carbon dioxide (CO2), nitrous oxide (N2O), methane
(CH4) and ozone (O3).
Greenwashing False or misleading claims made by an organisation on the environmental

and sustainability impact of any goods or services that they offer.
Hazard Possible source of harm. For climate change, hazards can include both the
sudden onset of extreme weather and long-term changes (e.g. rainfall
decline).
Term Definition
Impact The effect on the natural, built, economic and social domains due to climate
change.
Likelihood The probability of an event or risk occurring.
Maladaptation Any adaptation that does not succeed in reducing risk but inadvertently
increases it instead.
Maturity Refers to an organisation’s level of capability, performance, and

commitment towards understanding, managing, and reporting their
exposure to climate risks. The Climate Risk Management Guide is designed
to support improved climate risk and opportunity maturity over time by
iterating and building on previous work.
Mitigation In the context of climate change, mitigation describes efforts to reduce the
amount of greenhouse gases emitted into the atmosphere. This can be
done by either reducing current emissions arising from human activities
(e.g. energy consumption, transport, building energy efficiency) or directly
removing it from the atmosphere (e.g. through tree planting).
Opportunity Responding to the challenges of climate change can lead to a range of co-
benefits. These can include:
• Activities that lead to improved resource and energy efficiency that also
reduces greenhouse gas emissions or vulnerability to climate change
impacts by increasing resilience.
• Through an orderly and well-timed transition to a low carbon future,
activities could increase access to new markets, improved workforce
diversity and/or conditions that support economic growth and improve
public perception of government action.
Opportunity has a few different facets:
• Capitalising on gains from transition risk (e.g. new market opportunities).

• Opportunities to mitigate the risk through management actions.
• For Commonwealth agencies (particularly policy type functions) there are
also opportunities based on timing of emerging or existing work, e.g.
there could be opportunity to design a new policy/program etc based on
political will and broader circumstances. There are also natural review
points for policies, legislation, regulations, and guidance where
requirements related to climate risk could now be included.
Physical opportunity Building resilience to physical climate risk via nature-based solutions can
provide multiple benefits and opportunities. These include conserving
biodiversity, supporting eco-tourism, and building a more resilient
agricultural sector through healthier soils.
Physical risk Physical risks are associated with the direct impacts of rising aggregate
global temperatures. They can be characterised as:
Term Definition
• Acute – risks from changes in the frequency and severity of extreme

events, such as increased incidence of heat stress during heatwaves.
• Chronic – risks from longer-term, more gradual changes in climate, such
as changes in average rainfall contributing to water scarcity.
Risk The effect of uncertainty on objectives. Risk is often expressed in terms of a

combination of the consequences of an event (including changes in
circumstances or knowledge) and the associated likelihood of occurrence.
Examples of risks include strategic, enterprise, operational, project and
emerging.
Risk appetite The overarching amount and types of risk an organisation is willing to
accept or retain in order to achieve its objectives.
Risk assessment The process of risk identification, risk analysis and risk evaluation as defined
in ISO31000:2018 – Risk Management.
Risk culture Risk culture is a subset of organisational culture and refers to the system of
beliefs, values and behaviours throughout an organisation that shape the
collective approach to managing risk and making decisions. It is strongly
influenced by organisational culture and involves how an organisation views
and engages with risk. The risk culture of an organisation will greatly affect
how it approaches risk-taking and innovation.
Risk driver An attribute or characteristic that causes, or contributes to, a risk. Can
include either various climate hazards that underpin physical risks or the
different transition themes that underpin transition risks. See Chapter 2 for
further details on the different characteristics of climate risk drivers.
Risk management Coordinated activities to direct and control an organisation with regard to
risk. These activities include identification, assessment, monitoring,
communication, and reporting of risks.
Risk management policy A statement of the overall intentions and direction of an organisation in
relation to risk management.
Risk oversight The supervision of the risk management framework and risk management
process.
Risk profile A description of any set of risks. The set of risks can contain those that
relate to the whole organisation, part of the organisation, or as otherwise
defined.
Risk tolerance The levels of risk taking that are acceptable in order to achieve a specific
strategic objective.
Risk treatment The additional action undertaken to reduce a risk where it has been agreed
that the risk is outside of the entity’s tolerance, and the controls in place are
insufficient.
Term Definition
Scope 1, 2 & 3 emissions Scope 1: Greenhouse gas emissions released to the atmosphere as a direct
result of an activity, or series of activities at a facility. Examples include
those from manufacturing processes, burning of fossil fuels for transport on
energy generation.
Scope 2: Greenhouse gas emissions released to the atmosphere from the
indirect consumption on an energy commodity. Examples include electricity
consumed at your facility that was produced by the burning of coal at a
power generation facility.
Scope 3: Indirect greenhouse gas emissions from a source other than Scope
2 emissions that are generated in the wider economy as a consequence of
activities of a facility, but from sources not owned or controlled by that
facility’s organisation.
Transition opportunity Significant opportunities for Australia are already emerging as the global
economy transitions to net zero. Effective policy settings from the Australian
Government could see billions of dollars invested in key sectors across the
economy.
Transition risk Transition risks result from the extensive policy, legal, technology and
market changes that aim to address the mitigation and adaptation
requirements related to climate change and the transition to a low-carbon
economy.
Values at risk Things that are important to your organisation and could be affected by
climate change. Depending on the scope of your assessment, values may
be:
• Organisational goals or strategic objectives.

• Desired outcomes from a policy or program.
• The key work of a division or policy area.
• Types of assets or other infrastructure.
1. Scope the assessment
Defining the scope of a climate risk and opportunity assessment is about narrowing down the focus to be clear
on what is being assessed, why, and by whom.
Technical guidance for this step is split into three themes:
1. Key questions that can help with defining and refining your scope.
2. Governance and APS responsibilities.
3. Stakeholder engagement methods.
Scoping questions
Key questions to consider in defining the scope of a climate risk and opportunity assessment include:
1. Have you done a climate risk assessment before? If so, there is an opportunity to build on previous
work and target focus areas for your next assessment.
2. How much time do you have to complete the process? This determines how comprehensive the
assessment and determination of risk management options can go. If time is tight, we recommend
taking a more qualitative and high-level approach to expedite the process where later assessments can
be more comprehensive on areas that require this.
3. What is the size of your organisation or the program, project or policy area your assessment will
focus on? This can influence who needs to be involved in the process including stakeholders, the
resources and capacity to complete the process.
4. Does your organisation have any specific regulatory obligations or compliance requirements that
could be relevant? Compliance with these requirements will usually be a value at risk in your
assessment.
5. Does your organisational structure have a dedicated risk management function or climate and
sustainability team to support the process? If so, reach out to them at the beginning of the process
to find out what support they can provide and what their involvement should be.
6. Does your organisation have an enterprise risk management framework that any risk
management actions will need to adhere to? Understanding these existing requirements will inform
how to integrate climate risk into more regular work activities. Understanding where to find existing
corporate documents, guidance on what internal reporting, policies or procedures that are relevant can
also help to define assessment objectives.
7. How does climate change interact with the core purpose and objectives of your organisation,
program, project or policy area? For organisation-scale assessments these objectives can be used as
the values at risk. For assessments focused on more specific parts of your organisation they will still be
an important reference point.
8. What regions does your climate change assessment need to consider? This determines what
information and/or data to use in later stages of the process. Options can include global, regional (e.g.
Asia-Pacific), national (e.g. Australia) and sub-national (state, territory or local government area). If your
assessment considers global or regional scales, we recommend using global datasets so that risks and
opportunities are assessed consistently. If national or sub-national scale, we recommend using the
most recent national datasets for Australia.
9. Does the assessment extend beyond a single entity? This requires a collaborative effort of shared
oversight and management. These should address climate risks and opportunities that extend across
jurisdictions, sectors, and agencies.
Governance and APS responsibilities

Ideally, any climate risks and opportunities need to be integrated into your organisation’s existing enterprise
risk management framework. All APS personnel have a responsibility for managing and escalating risks in their
daily work, although their involvement with respect to climate risks and opportunities may vary.
Key documents that may be useful to further understand your obligations as an Australian Public Servant
conducting a risk assessment include:
1. Commonwealth Risk Management Policy

2. Public Governance, Performance and Accountability (PGPA) Act 2013
3. ISO 31000 Risk Management
4. ISO 14091 Adaptation to Climate Change
Stakeholder engagement methods

Stakeholder engagement is an opportunity to acquire knowledge, experience, evidence, and build a mutual
understanding within and potentially beyond your organisation.
Identifying individuals with the appropriate level of knowledge and confidence to engage in the process will be
contingent on the scope with more specific detail on requirements described in each Application Guide
(Organisation, Program, Project and Policy, or New Policy Proposal (NPP)) rather than in this Technical
Guidance.
Suggestions on the types of stakeholders to consider include:
• Key organisational functions: procurement, finance, human resources, legal, facilities and/or asset
management, risk management, sustainability, and climate.
• For policy or programs: senior executives involved in the development, implementation, monitoring
and/or evaluation of policy outcomes.
• Broader perspectives concerning consumer groups relations, industry groups, First Nations people,
other agencies involved in the policy area, or implementation and delivery (including beneficiaries / end
users) of a program or project.
Table 2 below summarises some of the most common ways of engaging stakeholders in climate risk and
opportunity management processes, and where they may be best deployed while implementing the
Application Guides.
Table 2: Common ways of engaging stakeholders in climate risk and opportunity management processes and the
corresponding steps in the Climate Risk Management Application Guides.
Engagement Where could this approach be Description of method Benefits

method used according to the
Application Guides?
Climate risk Steps 3, 4 or 5 described in the A facilitated discussion • Can include a larger group of
workshops Application Guides (excluding around key themes with stakeholders, ideally across
NPP). multiple participants in a relevant areas that can support
It can be helpful to run one climate session to prompt deeper knowledge exchange and ideas
discussions and elicit new on next steps to manage risks.
risk workshop for multiple reasons
such as to limit stakeholder fatigue, insights. • Can achieve multiple objectives
Used when the assessment such as increasing internal
e.g. run a workshop to both identify
capability and understanding of
risks and existing actions. is not time sensitive these
climate risks and opportunities
sessions can help with
across core functions within
identifying, prioritising and your organisation.
managing of climate risks
and opportunities.
One on one Steps 2, 3 or 5 described in the This session intends to To expedite risk identification (and
interviews Application Guides (excluding obtain specific information other useful internal
NPP). across relevant areas for documentation) and can be kept
It is recommended to brief your assessment content. short to focus on specific aspects
stakeholders ahead of any of your assessment scope.
interviews using the Stakeholder
Briefing Template provided in the
next section.
Surveys Steps 2, 3 and 4 described in the Involves circulating a • A systematic approach to

Application Guides (excluding questionnaire to get a gather a large sample of
NPP). broader perspective of key information consistently.
Where there is a wide range of themes or understanding of
• Can accommodate time
potentially divergent views to climate issues relevant for constraints if a workshop is not
involve, it can be helpful to create a your assessment context. possible.
survey to identify past impacts, as
well as identify and prioritise risks. A
follow-up climate workshop can then
be used to validate the results.
A provisional agenda for a climate risk workshop is described below (Table 3) and can be amended depending
on the purpose (risk identification, prioritising risks or managing risks through action). With appropriate
planning, several objectives can be met in one climate risk workshop and limit the risk of stakeholder fatigue.
Table 3: Provisional agenda for a climate risk workshop. Note that depending what step of the Application Guide the
workshop is to be held will inform whether all or a subset of the topics is included.
Topic Key items
1 Acknowledgement of Country and Encourage participants to introduce who they are, their role, and part of
introductions the organisation they represent.
2 Workshop objectives and context • Briefly highlight your organisation’s maturity in climate risk
management.
• Describe objectives of the workshop in the context of your

organisation.
• Set expectations for the participants.
3 What is climate risk? Briefly explain climate risk and opportunity concepts to ensure all
participants are on the same page.
4 Climate change in the Organisation Briefly summarise current understanding of climate change in the
context context of your scope.
5 Identified climate risks and • Discuss previously or newly identified climate risks and opportunities
opportunities and evaluate them based on their impact on your organisation.
• Allow participants to suggest additional risks.
• Discuss any known potential impacts associated with each

risk/opportunity.
6 Prioritise climate risks and opportunities • (Optional) Present findings from any climate scenario analysis work
first to help inform the prioritisation activity.
• Prioritise all risks according to their likelihood and consequence – can

be done as an in-workshop activity.
7 Actions to manage climate risks and • Discuss any existing measures in response to identified climate risks
opportunities and opportunities.
• Discuss new actions that could be pursued.
• Develop strategic choices to minimising risk or optimising

opportunities.
8 Next steps and close • List actions to follow up on post workshop.
• Determine roles and responsibilities for these actions.
• Offer participants opportunity to provide feedback to evaluate

effectiveness of workshop.
For more resources on stakeholder engagement:
1. The Australian Public Service Framework for Engagement and Participation available at: The
Department of Industry, Science and Resources, The Australian Public Service Framework for
Engagement and Participation
2. For engagement methods see A Guide to the Right Engagement available at: The Department of
Industry, Science and Resources, A Guide to the Right Engagement
3. International Association for Public Participation (IAP2), available at: International Association for Public
Participation (IAP2) Australasia, Quality Assurance Standard for Community and Stakeholder
Engagement
Stakeholder briefing template

This section includes a template that outlines an example of the purpose, background, essential context and
example questions that can be further refined to share with stakeholders you may engage with for the
duration of your assessment process.
Purpose
Describe the purpose of engaging the stakeholder
WE are representing ORGANISATION NAME to understand the potential impact of

climate change across PROJECT SCOPE and undertake a climate-related risk and
opportunity assessment and management project. As part of this, we seeking to
further understand the materiality of climate-related risks to ORGANISATION NAME /
PROJECT SCOPE by interviewing various stakeholders including SUMMARY OF
STAKEHOLDER GROUPS.
Background and Objectives
Describe the essential context
"The purpose of this process is to understand ORGANISATION NAME exposure to

current and emerging risks, opportunities and impacts associated with climate change
that are relevant for ORGANISATION NAME, to enable effective climate-risk
responses, and to ultimately enhance the Australia’s resilience against the impacts of
climate change and transition to a low carbon future.
The objective of conducting the stakeholder interviews is to understand historical

climate-related impacts experienced by ORGANISATION NAME. This 60 minute
session will take the form of an open discussion and will seek to understand all risks
and impacts to ORGANISATION NAME activities, and current strategic and operational
responses to them. You don’t need to be an expert on climate change to contribute.
Example themes and questions that will be covered in this session are detailed below."
Essential Definitions
What do we mean by climate risks and opportunities?
Governments and businesses are under increasing pressure from various stakeholders
to address and mitigate the risks of climate change. Climate change and
environmental risks are deemed as the top risks globally, in terms of likelihood and
impact, aside from COVID-19. Climate risk is assessed from two main perspectives:
• Physical climate risks which involve changes in weather and climate conditions,
including heatwaves, extreme rainfall, drought, rainfall decline, sea level rise
and many more. The consequence of these changes may lead to physical
impacts such as compromising human health and wellbeing, property damage,
and critical infrastructure failures. Minimising physical climate risks requires
both curbing the growth of greenhouse gas emissions (i.e. carbon mitigation)
and adapting to the impacts of a changing climate.
• Transition risks relate to the implications of pursuing the transition of our

society and economy to a low carbon future. Challenges associated with the
transition are changes in policy and regulation, technology development,
consumer/market preferences, and carbon pricing. These contribute to
transition risk."
Suggested discussion focus points
Introductions
a. Could you please introduce yourself and describe your role and responsibilities?
b. Can you summarise the high-level strategy and processes of your work area?"
Physical Risks
c. Have there been any past extreme weather events (e.g. cyclones, floods,
extreme heat, bushfires etc.) that have had an impact on the strategic
objectives of ENTITY NAME (can include productivity losses, incidents affecting
cloud services or employee health, safety and wellbeing)?
d. What has the impact of these risks and opportunities been on ORGANISATION
NAME work activities, business and strategy?
e. Has ORGANISATION NAME taken any control measures or implemented risk

mitigation strategies for managing potential physical climate risks? "
Transition Risks
f. Has ORGANISATION NAME tracked any transition risks under the current
enterprise risk management framework?
g. What climate-related opportunities for your work area do you foresee due to
the transition to a low-carbon economy?
h. Is there a strategic plan around the medium and long-term transition to net-
zero emissions?
Governance
i. Does your ORGANISATION NAME governing board or executive leadership

team systematically consider the influence of climate change or emissions
reduction on strategic objectives and core functions?
j. Has your ORGANISATION NAME established and documented any

accountabilities, roles and responsibilities for managing climate risk and
opportunity?
k. Do any of your ORGANISATION NAME corporate committees (e.g. risk and

corporate performance, internal audit, etc.) have an explicit role in overseeing
or managing climate risk and opportunity?"
Risk Management
l. Has your ORGANISATION NAME in its current form completed a formal climate
risk assessment across all its operations – policies, programs, asset
management, operations, service provision?
m. What challenges or barriers has your ORGANISATION NAME faced in assessing

and managing climate related risks and opportunities?
n. Does your ORGANISATION NAME enterprise risk framework or register include

any guidance or risks relating to climate change?"
Strategy
o. Does your ORGANISATION NAME have any other plans or strategies with
climate-related priorities, objectives or actions, e.g. corporate plan/strategic
plan, business plans?
p. Are climate-related issues considered in your, or other members of

management or the Board, decision-making (e.g., financial plans, strategic
plans, investment decisions etc.)?
q. Are you aware of measures that ORGANISATION NAME is implementing at the

enterprise level to address climate-related risks and capture climate-related
opportunities (e.g., planning for future climate-related regulations)?"
Metrics & Targets
r. Does your ORGANISATION NAME use any metrics or targets to measure

climate risks and opportunities, including emissions reporting?
s. Does your ORGANISATION NAME own or manage physical assets outside of

office space (examples include property, facilities, infrastructure or buffer land
around military bases or national parks)?"
Further Information
For more information
If you have any queries about ASSESSMENT PROJECT NAME, please contact the TEAM
NAME team on EMAIL ADDRESS.
2. Consider current and future state
Understanding current and future state will help you to draft risk and/or opportunity statements that form a
core part of climate risk assessment.
Technical guidance for this step is split into two themes:
1. Common risk and opportunity drivers.

2. Common impact categories.
Common risk and opportunity drivers

For physical risks and opportunities, drivers are commonly associated with a variety of hazards that are split
into chronic or acute types (Table 4). Chronic hazards are those associated with the long-term state of the
climate at a location where changes are gradually emerging that may lead to greater physical risks. Acute
hazards are often characterised by episodic conditions associated with extreme weather events and climate
extremes.
Table 4: Common physical risks and/or opportunity drivers
Risk type Risk sub-category Climate risk/opportunity driver
Physical Chronic Temperature rise
Rainfall changes
Sea level rise
Acute Extreme heat (incl. hot days, heatwaves, warm spells)
Extreme cold (incl. cold snaps, snowstorms)
Extreme rain (incl. hail)
Flood (incl. flash flooding, riverine flooding)
Drought (incl. dry spells)
Bushfires (incl. weather conditions conducive to fires and poor

air quality)
Tropical cyclone
Storm Surge (incl. coastal inundation)
Extreme Wind (incl. storms, tornadoes)
There are several existing resources (described below) that articulate current understanding of various
physical hazards and how they may change in their frequency and severity with climate change. There are also
resources that provide useful context of the broader implications of past high-impact events with a summary of
some recent high-impact events provided in Figure 3.
Current and future climate

1. For further information on the current state of climate change in Australia see the State of the Climate
report available at the Bureau of Meteorology, Climate, State of Climate, 2022 developed by CSIRO and
the Australian Bureau of Meteorology (BoM). These reports are published annually and provide up to
date national and global climate data and information for public consumption.
2. Further information on more regional climate changes can be found on the Climate Change in Australia
Regional Climate Change Explorer available at: Climate Change in Australia, Climate information,
projections, tools and data, Projections tools, Regional Climate Change Explorer, Sub-Clusters
3. If you require the more global context check out the suite of reports, factsheets and interactive tools
from the Intergovernmental Panel on Climate Change (IPCC) website. For regional summaries on
climate change see either:
a the Interactive Atlas: Regional Synthesis available at: Intergovernmental Panel on Climate Change,
Working Group 1, Regional Synthesis
b Regional factsheets created from the most recent Sixth Assessment Report (AR6) see:
Intergovernmental Panel on Climate Change Sixth Assessment Report, Working Group 1: The
Physical Science Basis, Fact Sheets
c Chapter 12 of the IPCC AR6 Working Group 1: The Physical Science Basis at: Intergovernmental
Panel on Climate Change Working Group 1: The Physical Science Basis, Chapter 12: Climate Change
Information for Regional Impact and for Risk Assessment
Past events of historical significance

4. BoM also provide periodic Special Climate Statements available at the Bureau of Meteorology, Climate,
Reports and Summaries, Special Climate Statements that summarise recent high impact events on both
national and sub-national scales that can form a useful basis on recent events to consider whether they
have impacted your organisation.
5. Further information on the consequences of high-impact weather events related to property damage
can be found either through the annual catastrophe reports produced by the Insurance Council of
Australia available at Insurance Council of Australia, News Hub, Current catastrophes, Insurance
Catastrophe Resilience Report 2023-23 or by searching their data hub available at: the Insurance Council
of Australia, Industry & members, Data hub. Note: may not necessarily capture all events or impacts but
can serve as a useful starting point. The Australian Institute for Disaster Resilience also maintains a
repository of historical disaster events available at: the Australian Government National Emergency
Management Agency, Knowledge Hub, Collections, Australian disasters
Figure 3: Summary of recent high-impact events from different type of physical risk drivers that also had broader transition risk implications. Sources: (1) Wittwer and Washchik
(2021) available at Wiley online library, Special Issue, Estimating the economic impacts of the 2017-2019 drought and 2029-2020 bushfires on regional NSW and the rest of Australia (2)
Australian Institute for Disaster Resilience – Historical Disaster Database available at: the Australian Government National Emergency Management Agency, Knowledge Hub,
Collections, Australian disasters and (3) Insurance Council of Australia – Data Hub – Historical Catastrophe Data available at: the Insurance Council of Australia, Industry & Members,
Data hub.
For transition risks and opportunities, drivers are often grouped according to policy, regulation, reputation,
markets, legal, and technology themes.
Generally, transition drivers can involve imposing taxes, restrictions or incentives that change the supply or
demand of specific resources and how this may interact with multiple socio-economic factors. Particularly for
transition risks, changes in population, urbanisation, land use, economic and industrial activity, energy system
composition, transport and logistics and be important determinants of transition risks.
Table 5 below summarises a list of both physical and transition risk and/or opportunity drivers, noting that you
may identify others relevant to your assessment through stakeholder engagement.
Table 5: Common transition risks and/or opportunity drivers
Risk type Risk sub-category Climate risk/opportunity driver
Transition Policy Increase price of emissions
Other climate policy and regulation
Legal Litigation for non-compliance
Geopolitical risk
Regulatory Increased cost of compliance
Reputation Poor public perception of an industry, program or policy
Technology Low emissions energy supply
Capital cost of new technology
Resilience opportunities through technology
Market shifts Changing public preference and behaviours
Increased supply chain costs
Investment opportunities to enable future technologies
Stranded assets from fossil fuels
Trade exposure risks (carbon boarder tariffs, etc.)
Workforce requirement
Resource and Circular economy opportunities

energy efficiency
potential
Resources to learn more about the socioeconomic attributes relevant for transitions risks and opportunities are
provided below. Included are those most relevant for the Australian context.
1. To understand potential scenarios for Australia’s economy, environment and society, check out the
Australian National Outlook available at: CSIRO Futures: Strategic and Economic Advice, Innovation and
Business Growth, Australian National Outlook.
2. Information on recent Australian socio-economic trends includes the Treasury Intergenerational

Reports available at: Intergenerational reports. For more recent updates between these reports see the
Progress in Australia Regions and Cities Dashboard available at: the Department of Infrastructure,
Transport, Regional Development, Communications and the Arts, Research & data, Bureau of
Communications, Arts and Regional Research, Data Dashboards for a range of indicators maintained by
the Department of Infrastructure, Transport, Regional Development, Communications and the Arts.
3. General and sector specific trends relevant for transition risks are also available from the IPCC Sixth
Assessment Report Working Group 3: Mitigation of Climate Change available at: IPCC Sixth Assessment
Report, Working Group 3: Mitigation of Climate Change, Climate Change 2022: Mitigation of Climate
Change. Chapters include detail on emissions trends and drivers and sector specific chapters include
energy, transport, industry, technology, buildings, agriculture, with some cross sectoral perspectives
also available in Chapter 12.
There are a range of online digital tools that help visualise a variety of information relevant for climate risks
and opportunities. The list below provides a short list of options to consider for both physical hazards and
transition drivers. If these do not quite fulfil your needs, seek guidance from the Support Service on
alternatives.
1. Climate Services for Agriculture available at: My Climate View has many metrics that can inform physical
climate risk assessment and doesn’t have to be limited to the agriculture sector but provides more
granular detail that the IPCC Interactive Atlas.
2. Hydrological projections for Australia from the BoM Australian Water Outlook available at: the Bureau
of Meteorology, Australian Water Outlook.
3. NESP Tropical Cyclone Projections Portal available at: the National Environmental Science Programme,
Earth Systems and Climate Change Hub, NESP Tropical Cyclone Projections Portal includes projections
for the Australasia region.
4. Air pollution monitoring by the World Air Quality Index Project is available at: The World Air Quality
Index Project, Map, Australia.
5. The Shared Socio-economic Pathways (SSPs) Public Database available at: International Institute for
Applied Systems Analysis, Shared Socioeconomic Pathways Database - Version 2.0 which hosts the
datasets that underpin the climate scenarios of the IPCC Sixth Assessment Report.
Common impact categories
To uncover the ways in which your organisation could be affected by climate change in the future, it is helpful
to start a list of the ways in which climate risk drivers have affected your organisational values in the past (or
how they have affected similar organisations). Understanding these past impacts can support drafting of risk
statements and provide a baseline against which to consider the projected effects of climate change.
Three important sources of information on past impacts that can help with identification include:
• Stakeholder knowledge: The knowledge and experiences of stakeholders can quickly provide
examples of past events that have impacted your organisation and can advise you on any internal
documentation and data systems that may capture such information more systematically.
• Internal documentation: Existing resources from within your organisation such as asset management
plans, risk registers, incidents, claims, invoices, energy usage may include important information that is
material to the scope of your assessment.
• External sources: These can include research-based evidence from IPCC assessment reports, industry
reports, reports from leading scientific organisations (e.g. Bureau of Meteorology, CSIRO), and
academic peer-reviewed literature. Many are suggested as the additional resources in this chapter.
Your organisation’s enterprise risk management framework will likely have a set of consequence categories
that give some sense of the impacts it is concerned about (e.g. safety, reputation). In addition to these, other
impact categories worth considering for climate assessments include:
• Compromised health, safety, and wellbeing. • Energy security.

• Power disruptions and extreme weather events • Service disruption.
affecting business continuity. • Productivity losses.
• Financial sustainability. • Equipment failure.
• Property damage. • Critical infrastructure failure or damage.
• Food security. • Supply chain.
• Water security. • Stranded assets.
The impacts that may be associated with each climate risk or opportunity driver vary depending on the context.
For example, the impacts of extreme heat vary depending on the activity:
• If considering outdoor activities direct exposure to extreme heat can affect health and wellbeing (e.g.
heat stress).
• For heavy industry, direct exposure to extreme heat can lead to equipment failure or malfunction that
compromise its safe operation and impact productivity.
• During extreme heat events, cooling requirements of buildings can increase, leading to higher energy
costs, or power failures when electricity supply cannot cover the surge in demand.
For further information on impacts, see the resources below as a starting point before conducting a more
specific literature review or seeking guidance from the Support Service.
1. For information on impacts commonly associated with climate change see the IPCC Sixth Assessment
Working Group 2: Impacts, Adaptation and Vulnerability Report available at: IPCC Sixth Assessment
Report, Impacts, Adaptation and Vulnerability, Climate Change 2022: Impacts, Adaptation and
Vulnerability. Each chapter is split either by sector or region (see Chapter 11 for Australasia which also
includes a summary of socio-economic trends) with useful summary factsheets available at: IPCC Sixth
Assessment Report, Impacts, Adaptation and Vulnerability, Fact Sheets with a more graphical view from
the Annex I: Global to Regional Atlas available at: IPCC Cross Sectoral Perspectives report
2. The Insurance Australia Group Limited (IAG) has a series of severe weather factsheets that summarise
key features for bushfires, floods, tropical cyclones and hail that are available at: IAG, Sustainability,
Severe weather fact sheets.
3. Identify your risks and opportunities
Identifying climate risks and opportunities requires you to consider how climate risk drivers intersect with your
organisation’s values. When a risk eventuates, this can lead to impacts and consequences for your
organisation. Recording all these attributes systematically can support drafting risk and opportunity
statements that can be used for internal reporting purposes, including integration into your organisation
enterprise risk management framework.
Technical guidance in this chapter provides more detailed information and is split into two themes:
1. Examples of risk and opportunity statements.

2. Complex and shared risks.
Examples of risk and opportunity statements

At a minimum, for a risk or opportunity statement, you need to articulate the:
1. Risk driver(s) and changes (e.g. increasing, decreasing) in their frequency and/or severity.
2. How it could impact the value at risk.
3. Consequences for your organisation and its external stakeholders.
Although impact and consequence are often used interchangeably, for climate risks and opportunities there is
nuance to these terms: impacts affect the values at risk while the consequences can affect the organisation. In
the worked examples in Figure 4 below, the consequence of extreme heat could be a decrease in productivity,
however the reason for this could vary by different impacts – either on the workforce directly, or indirectly by
affecting services the workforce requires to execute their activities.
Figure 4: Components of a risk statement with worked examples to illustrate the nuance between the concepts of values at risk, impact and consequence when drafting climate risk
and opportunity statements.
Table 6 illustrates examples of how different factors can be considered to draft a risk/opportunity statement.
Table 6: Example of factors which go into drafting a risk/opportunity statement.
Note that for opportunities the consequences here are framed in terms of the potential negative outcomes of not pursuing the
opportunity.
Risk driver Values Impact Consequence Risk/opportunity statement
Severe Business Power failures Productivity loss due Risk: Increased risk of power
weather – continuity triggered by to power failure failures affecting data centres,
multiple severe weather related service office spaces, and critical
disruption triggered infrastructure, due to extreme
by severe weather weather events (bushfires,
flooding, heatwaves etc.).
Opportunity: Improve resilience

of critical infrastructure in high-
risk areas that cannot be
relocated – can have benefits to
further service communities and
businesses in these areas.
Flood Access to Road closures Project delay due to Risk: Inability to access offices
frequency facilities floods prohibiting and other facilities due to
access to facility increased frequency and severity
of floods and/or bushfires
affecting workforce productivity.
Opportunity: Improve flexible

work arrangements to limit
disruption from temporary office
closures arising from floods or
bushfires – can have benefits for
other circumstances where
remote working is needed (e.g.
building services failures;
pandemics).
Severe Workforce WHS incidents Serious injury Risk: Increased WHS

weather - mobility and leading to incidents/claims for employees
multiple wellbeing reputational damage working from home, the office or
and potential while commuting to/from work
lawsuits during extreme weather events.
Opportunity: Revise WHS policy
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to accommodate alternative
workplace options (e.g. tools
down, flexible working) during
adverse weather and can have co-
benefits to accommodate flexible
work arrangements when
extenuating circumstances (e.g.
COVID-19) require it.
Severe Workforce Property Operational Risk: Increased risk of damage of

weather – productivity damage disruptions and critical infrastructure, contributing
multiple productivity losses to major operational disruptions
due to property and productivity losses due to
damage caused by increased frequency and severity
severe weather of floods, bushfires, and extreme
weather.
Severe Access to Project delays Higher financial Risk: Increased risk of supply
weather – critical costs to obtain chain disruption of materials
multiple supplies critical supplies to required for operational activities
limit project delays due to remote extreme weather
due to severe events affecting traditional
weather disrupting transportation routes.
transport logistics
Drought Funding Support not Maladaptation Risk: Increased risk of funding

program getting to projects that do not build
objectives where it is resilience and lead to poor
needed most outcomes.
Drought National park Environmental Biodiversity loss in Risk: Increased risk of biodiversity
leading to management damage national parks due losses and threaten species due
bushfires to extreme bushfire to increased severity of bushfires.
events
High Funding Increasing Higher financial Risk: Price premiums on low-

demand for infrastructure input costs costs of delivering emissions energy and material
low critical infrastructure inputs (due to low supply high
emissions demand) and penalties on legacy
technology emissions-intensive processes
lead to higher costs of delivering
critical infrastructure.
Opportunity: To establish local

manufacturing capability to
deliver low emission technology
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solutions – can have a co-benefit
by establishing alternative
industries to support an equitable
transition to a low carbon future.
Access to Emissions Missed targets, Higher financial cost Risk: Limited access to critical
low reduction increased costs to access in-demand components and materials
emissions targets components and required to implement the low
technologies materials. emissions solutions required to
meet ambitious emissions
reduction targets. This leads to
the inability to achieve
increasingly ambitious emissions
reduction targets.
Market Emissions Missed targets, Higher financial cost Risk: Shortage of critical skills and
shifts: Access reduction increased costs to access in-demand workforce required to implement
to critical targets skills. Potential the low emissions solutions
skills and challenging political required to meet ambitious
workforce situation following emissions reduction targets. This
apparent neglect of leads to the inability to achieve
emissions reduction. increasingly ambitious emissions
reduction targets.
Complex and shared risks

Note that climate change may result in entirely new risks. Changes in socio-economic and demographic factors
along with increased frequency and intensity of physical risk drivers may result in complex risks . At this stage
you should also consider any compound and complex risks that might be relevant for you and include them in
your risk register.
It is increasingly understood that a siloed consideration of risks can obscure their true effect and potentially
lead to the wrong actions being taken. It is important to consider and document how multiple risks may
interact – this is known as complex risk – or how risks may have a shared responsibility for their management
– this is known as shared risk.
Example
The following two events experienced across Australia can be considered as complex and compounding risks
that were associated with multiple physical hazards occurring sequentially but had broader socio-economic
implications for the Australian population:
1. Consecutive La Nina events dominated weather and climate across eastern Australia contributed to
persistent heavy rainfall events leading to several record-breaking flooding over 2021 to 2022.
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2. The 2019/20 Black Summer bushfires across southeast Australia have been linked to the widespread
landscape dryness associated with the drought conditions that persisted over 2017-2019.
For more information on high impact compound events in Australia see the summary prepared by the
Australian Research Council Centre of Excellence for Climate Extremes available at: High Impact Compound
Events in Australia, September 12, 2022.
There are different ways to which complex and/or shared risks can emerge between different concurrent or
sequential circumstances eventuating. An example is illustrated in Figure 5.
Figure 5: Types of complex risks explained.
Refer to ‘alternative text for images’
Further information on these concepts is available in Simpson et al. 2021 available at: Science Direct, Article, One Earth, Volume 4,
Issue 4, 23 April 2021, Pages 489-501.
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Shared risks are those risks that extend either across divisions within your organisation or beyond your
organisation to other Commonwealth entities, stakeholder groups, the community, industry, levels of
government (e.g. state and local), and international jurisdictions. From the Commonwealth Risk Management
Policy, shared risks within the Commonwealth includes any risk that may threaten the safety and security of
entities and the services that they provide and can include natural disasters, acts of terrorism, infrastructure
failures, and market failures.
Example
Bushfires are a risk for critical infrastructure providers. When bushfires damage core sites that keep the power
and telecommunications on for a large region, this can impact emergency response capacity and potentially
increase the threat to communities unaware of their immediate exposure.
While power and telecommunications providers are required to maintain vegetation at their sites, for protected
areas this responsibility lies with the Commonwealth or state and territory governments. Bushfire response
responsibilities lie primarily with state and territory governments, but aspects may be shared with others.
When critical infrastructure is damaged, providers cannot restore power and telecommunications until it is safe
to do so. This is a case where the risk from bushfires to critical infrastructure is shared and requires
collaboration and coordination between organisations.
This example was a situation that emerged during the 2019-20 Black Summer Bushfire season that triggered a
Royal Commission into National Natural Disaster Arrangements. The Findings to which are available at: the
Australian Government Royal Commission into National Natural Disaster Arrangements. We have high
confidence that bushfires will increase in frequency and severity with climate change.
Note that there may be existing mechanisms to support the management of shared risks, such as working
group committees, inter-organisation committees, taskforces and policies. In the Australian Government Crisis
Management Framework, there is a National Coordination Mechanism to coordinate efforts between
Commonwealth and state/territory entities. Details are available at: the Australian Government Department of
the Prime Minister and Cabinet, Australian Government Crisis Management Framework Version 3.2 November
2022
For more information about shared risk and practical strategies for managing them, see the Comcover web
page on shared risks available at: the Australian Government Department of Finance, Government, Comcover,
Risk Management Services, Risk Management Toolkit, Element 6: Shared Risks.
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There are several aspects to consider when determining how to manage shared risks and the accountability for
treatment actions:
1. Visibility of the risk. Individual stakeholders will likely be able to see or understand different aspects
of the risk. Proactive and comprehensive information exchange is essential to fully identify the nature
and severity of these risks, monitor their status, and manage their potential consequences.
2. Level of understanding of controls, treatments, and responsibilities. Responsibility for

implementing and managing controls and treatments should be agreed to and clearly allocated across
separate entities. This involves collaborative approaches to designing, monitoring, and reporting the
effectiveness of controls. It is important to ensure that the approach is sufficiently understood by all
parties. The allocation of controls is important as the risk environment, structure and management
priorities change over time across entities.
3. Exposure to consequences and effects. When a risk is realised, a shared risk may impact a number of
entities and the wider community. Where practicable, entities are encouraged to establish mechanisms
to appropriately share the burden of the risk exposure. This can be achieved through sharing
capabilities, defining exposures explicitly in governance arrangements, or through agreeing treatment
plans.
4. Responsibility of Accountable Authority. Where a risk stretches across more than one entity, it may
be unclear who owns the risk. In this case Accountable Authorities are responsible for their entity’s
contribution and exposure to the management of these risks. Guide to implementing the
Commonwealth Risk Management Policy available at: the Australian Government Department of
Finance, Government, Comcover, Risk Management Services
Moreover, multiple organisations will have different risk frameworks, processes, risk rating matrices and risk
appetites. This adds to the complexity and the importance of collaboration, communication, and common
language.
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4. Prioritise risks and opportunities
Prioritisation informs which climate risks and opportunities may require a deeper assessment and potentially
further treatment actions. Each of the Application Guides provides provisional information on how to assess
climate risks and opportunities that can inform the prioritisation process.
Technical guidance in this chapter provides more detailed information and is split into two themes:
1. Climate scenario analysis.

2. Risk prioritisation.
Climate scenario analysis

This section provides substantial detail on the various characteristics of a climate scenario analysis with detail
split according to the following themes:
• Methods used for climate scenario analysis.

• Scenario narratives.
• Recommended climate datasets.
• Characteristics for assessing physical risks and opportunities.
• Characteristics for assessing transition risks and opportunities.
• Recommended ways to manage uncertainty.
Recommendation
Considering future climate does not require you to be a climate scientist or create scenarios.
There are existing datasets that have been developed by the global climate science community that you should
use to assess your climate risks and opportunities. There are some datasets developed specifically for the
Australian context in collaboration between CSIRO, Bureau of Meteorology and the university sector that can
be used with details provided in this guide.
There are multiple climate scenarios with different socio-economic narratives that lead to different warming
levels over the coming century. Using common data sources for future climate will ensure your assessment is
robust and comparable to other organisations.
In the instance you are unsure of how to proceed, contact the Climate Risk Support Service at
ClimateRisk@dcceew.gov.au.
IMPORTANT:
Although speculation exists that some climate scenarios are more plausible than others, climate variability (i.e.
year-to-year fluctuations in conditions associated with large scale climate drivers such as the El Niño Southern
Oscillation) dominates up to 2030. Therefore, it is still too early to declare one climate scenario is more realistic
than others. This is why at least two scenarios should be considered.
Methods used for climate scenario analysis

There are different analysis methods that can be applied to climate scenarios (Table 7), with each approach
more appropriate for particular applications. Generally, if you don’t have a lot of time or resources, start with
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the high-level qualitative approach, this can help incentivise commitment from senior leadership to invest more
resources to do further comprehensive assessments.
Table 7: Different analysis methods to apply to climate scenarios.
Approach What does this involve? When to use
Physical Transition
High-level Involves summarising key trends (e.g. national, state, NRM)
• When you don’t have a lot of
qualitative to explore the potential range of climate changes from time and limited resources.
available literature.
• When you want to know what
broad challenges may arise
Generally, a qualitative assessment is a synthesis of existing reports, from climate change for your
academic papers, scientific technical reports, and stakeholder assessment context.
engagement to validate findings. The summaries provided with the
Application Guides are an example of a qualitative summary for the • When you need to motivate
National context that you could use and build upon if more detail is executive sponsorship to do
required. more.
Data-driven Physical: Involves Transition: Involves extracting When you need more specific
quantitative extracting climate hazard and mapping specific metrics information across your
metrics for an from available scenarios to assessment context to make
organisation’s specific quantify the magnitude of evidence-based decisions.
locations (latitude and changes over a given time
longitude) to assess period. The metrics extracted
projected changes across would align with any prioritised
all scenarios and time risks and opportunities
horizons. Ideally, includes identified for an organisation
translating climate data (e.g. change in demand for
into the impacts (e.g. commodities, expected level of
asset value exposed, energy productivity, change in
productivity losses) and type of fuels used).
identify which locations
are more exposed to
prioritise next steps.
Financial Physical: requires more Transition: extends the analysis When you need to be able to
impact data from the to perform financial calculations demonstrate the cost vs.
assessment organisation to determine utilising organisational data. For benefits to justify expenditure
with cost- model assumptions to example, applying the expected on risk management actions.
benefit perform financial rate of change of a metric from
analysis calculations (e.g. estimate the scenarios to determine the
the cost of doing nothing). implied changes to
organisational assets.
There are differences in the underpinning datasets used for climate scenario assessment for physical and
transition risks and how to use them. These are described separately below. Note that undertaking a data-
driven quantitative scenario analysis may require you to involve specialist input; having some understanding of
the concepts below can help you to ask the right questions when seeking this input.
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Scenario narratives
While exploring future climate you will need to use climate change scenarios (also commonly referred to as
emission scenarios). This section summarises the main narratives that underpin the scenarios commonly used
for Climate Scenario Analysis.
Future climate changes depend on a range of multiple drivers, including differences in the rate of global
greenhouse gas (GHG) emissions that arise due to different socioeconomic factors (e.g. population growth,
technology, urbanisation, economic growth). The likelihood of different scenarios eventuating depends on
global adaptation efforts (to reduce impacts) and mitigation ambition (to reduce emissions and atmospheric
GHG concentrations).
Scenarios of the future global climate range from:
• High emissions: a world with dangerous climate change (exceeding a global warming level of 4°C
compared to a pre-industrial baseline) where current emission trajectories continued. This is a scenario
where mitigation efforts are limited and considerable adaptation to the physical impacts of climate
change is required.
• Moderate emissions: where emissions are curbed based on existing policies and commitments with a
global warming of level of 2-3°C. In this scenario, there are moderate challenges to both mitigation and
adaptation.
• Low emissions: where mitigation efforts to curb emissions are ambitious to limit warming at or below
1.5°C. It is likely that there will still be some physical impacts associated with this scenario that may be
greater than those felt today.
The global climate science community periodically update the climate scenarios that inform the assessment
reports from the IPCC. There are currently two main generations of climate scenarios:
1. Those associated with the Sixth IPCC Assessment Report (IPCC AR6) are referred to as the Shared Socio-
economic Pathways (SSPs).
2. The previous generation of climate scenarios for the Fifth IPCC Assessment Report (IPCC AR5) are
referred to as the Representative Concentration Pathways (RCPs).
The RCPs are defined by different energy imbalances that lead to different warming levels by 2100. The SSPs
build upon the RCPs by defining the socio-economic narratives that drive changes in greenhouse gas
concentrations over the 21st century that result in these different warming levels.
The characteristics of both scenario generations are summarised in Table 8.
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Table 8: Summary attributes of the main climate scenarios you should consider using in your assessment.
Scenario Aggressive Mitigation Current Targets & Pledges Limited Climate Action
Ambition
Emission Low Moderate High

Level
Global 1.5°C >2°C >4°C
Warming
Level by 2100
IPCC Scenario Physical: SSP1-2.6/RCP2.6 SSP2-4.5/RCP4.5 SSP5-8.5/RCP8.5
Transition: SSP1-1.9/RCP1.9
Overview Aggressive emission Emissions are curbed based Baseline of how global emissions
reduction scenario to on existing policies and would evolve if governments and
meet the Paris announced commitments, markets make no changes to their
Agreement, marked by including Nationally existing policies and investments
global collaboration by Determined Contributions, in low carbon.
governments, society and but fall short of meeting the
industry to lead steep Paris Agreement targets.
decarbonization.
Socio- Educational and health Social, economic, and Rapid technological progress and
economic investments accelerate technological trends do not development of human capital as
Narrative the demographic shift markedly from seen as the path to sustainable
transition, and the historical patterns. development, with strong
emphasis on economic Development and income investments in health, education,
growth shifts toward a growth proceeds unevenly. and institutions to enhance
broader emphasis on Global and national human and social capital. The
human well-being. Driven institutions work toward but push for development is coupled
by an increasing make slow progress in with the exploitation of fossil fuels
commitment to achieving achieving sustainable and the adoption of resource and
development goals, development goals. Income energy intensive lifestyles around
inequality is reduced both inequality persists or the world. There is faith in the
across and within improves only slowly and ability to effectively manage social
countries. Population challenges to reducing and ecological systems, including
levels peak at 8.5 billion vulnerability to societal and by geo-engineering if necessary.
between 2050 and 2060 environmental changes Global population peaks and
and decline to today’s remain. Global population declines in the 21st century,
level of around 7 billion by peaks between 2070 and similar to SSP1.
2100. 2080 around 9.5 billion, and
decline slightly to around 9
billion by 2100.
Key Transition risks and Insufficient decarbonisation. Physical risks dominate.
Outcomes opportunities dominate. Emissions are curbed based Emission reduction policies are
Globally coordinated on existing policies and limited to the current policies, and
effort to reduce emissions announced national
to net zero around 2070 commitments to reduce
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Scenario Aggressive Mitigation Current Targets & Pledges Limited Climate Action
Ambition
globally (2050 in emissions, but fall short of global coordination on tackling
advanced economies such meeting the Paris climate change is lacking.
as Australia) and avert the Agreement. Continued use of fossil fuels, and
worst effects of climate Slow implementation of energy intensive activities and
change in line with the policies due to political, lifestyles.
Paris Agreement. institutional and societal Momentum in clean energy is
Accelerated transition to barriers. insufficient to offset the effects of
renewables and The transition to a low an expanding global economy
electrification, and carbon economy is and growing population.
aggressive regulations disorderly, uncoordinated Effects of climate change require
limiting the extraction and delayed. Transition significant investments in
and use of fossil fuels in happens faster in certain adaptation measures to protect
all major economies. regions compared to others assets, infrastructure and
Assumes the world leading to differences in communities.
achieves Sustainable regional policies and
Development Goals by implications on cost of doing
2030. business and global trade
(e.g., carbon border tax).
Underpinning assumptions of different indicators
Population Low Medium Low
growth
Migration Medium Medium High
GDP growth High Medium, uneven High

per capita
Inequality Reduced Uneven, moderately reduced Strongly reduced
Globalisation Connected markets Semi-open global economy Strong
Consumption Low material consumption Material intensive Materialism
Technology Rapid Medium, uneven Rapid
development
Energy Away from fossil fuels Some investment in Directly towards fossil fuels
technology renewables
change
Fossil fuel High Medium None
constraints
Land use Strong Medium Medium
regulation
Agriculture High Medium High
productivity
Policy Effective Relatively weak Limited for environment
Institutions Improved management of Local concerns but moderate Little concern with global problems
local and global issue. success in implementation
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Recommended climate datasets
There are publicly available datasets of the different climate scenarios that can be used to inform climate risk
and opportunity assessments. There are both global and regional datasets, with the latter providing more
detailed information/data. It is recommended to use the more detailed information from regional datasets if
the scope of your assessment doesn’t need to consider the global perspective.
The datasets commonly used to assess transition climate risks come from integrated assessment models which
vary in granularity and detail. Some models are better suited to representing the details of a particular
geography or sector, often at the expense of breadth – i.e. a model of the Australian electricity system does not
typically have the same level of detail for all other countries, making comparisons tricky. This requires one to
consider the desirable breadth and depth of the assessment required (e.g. state, country, international; for all
sectors of the economy, or just one) according to the scope of your assessment. Information summarising
available datasets are provided in Table 9 for physical risk assessment and Table 10 for transition risk
assessment.
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Table 9: Summary of available climate scenario data to inform physical climate risk assessments.
Climate Change in Australia (2015) IPCC AR6 (2021)
Source Climate Change in Australia, Climate IPCC Sixth Assessment Report, Working Group 1:
information, projections, tools and data The Physical Science Basis
Hazards | • Days over temperature threshold (e.g. Follows the standard specified by the Expert team
Metrics 35°C, 40°C, 50°C) on Sector-Specific Climate Indices (ET-SCI) with 27
• Extreme rainfall (2, 5, 10 and 20 year climate extreme indices
return period)
• Very high fire days, Severe fire days and
extreme fire days
Trend Available for 15 sub national regions for Factsheets: IPCC Sixth Assessment Report, Working
Narratives multiple hazards Group 1: The Physical Science Basis, Fact Sheets
Interactive: IPCC WG1 Interactive Atlas with a
regional synthesis
Emission • Moderate (RCP4.5) • Low (SSP1-2.6) • Moderate-High (SSP3-7.0)
Scenario(s) • High (RCP8.5) • Moderate • High (SSP5-8.5)
(SSP2-4.5)
Time Horizons Discrete 20-year periods: 2030, 2050, 2070, Discrete 20-year periods: 2030, 2050, 2090, global
2090 warming levels (1.5°C, 2°C, 3°C and 4°C) and
regional level annual time series from 1950 to 2100
Scale National Global but also includes higher resolution regional
datasets for Australia
Granularity Underpinning data is 5km however there Underpinning data is of order 100km with
regional summaries are available summaries for 4 sub national regions
Advantages • The best available high-resolution • More scenarios, including those aligned to the
climate projections for Australia. Paris Agreement.
• Specifically developed for the Australian • Scenarios also have an existing narrative of
context. global socio-economic trends and can enable a
connection between physical and transition risks.
Disadvantages • RCPs do not contain information • Metrics for severe weather hazards not yet
regarding socio-economic conditions. available.
• Dataset was not designed with • Coarse resolution and large regions defined for
extremes in mind and therefore there Australia may not be fit for purpose (e.g. islands
are no metrics for hazards that may be will not be well represented).
of interest – storm surge, • Limited information translating projected climate
thunderstorms, extreme wind. changes into impacts.
• No scenario aligned to the Paris
Agreement.
• This is a dated dataset, and will be
superseded when the new downscaled
projections become available.
• Limited information translating
projected climate changes into impacts.
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Table 10: Summary of available climate scenario data to inform transition risk assessments.
IPCC NGFS Australian Others

National Outlook (e.g. AEMO ISP, ClimateWorks
(ANO2) Decarbonisation Futures,
Reputex Powering Australia
Plan)
Robustness Very high (peer High Med-High (Not Medium (Generally not peer
reviewed, (Leverages peer reviewed, but reviewed, but with varied
multiple peer-reviewed completed by stakeholder consultation)
models) processes and CSIRO with robust
multiple stakeholder
models) consultation)
Emission “RCP/SSP” – Six scenarios 2 scenarios (~2°C Varies (few ~1.5°C, some ~2°C and
Scenario/s Range of (1.4°C to 3°C+) and 4°C), 3°C+)
temperatures and 3 models ensemble of
and models models
Granularity Moderate Moderate - High (Australia- Very high (Generally Australian-
(High-level High (Country- specific) specific with state level (or finer)
regional / scale data, but data)
categorical determined
data, e.g. through
OECD) downscaling)
Sectoral detail Low-Moderate Moderate (Sub- High (All sectors High - Very high (Some models
(select metrics) sectors and represented) have asset level data for select
metrics depend sectors)
on model and
downscaling)
Sectoral Low-Moderate Moderate (Sub- High (Emissions by Moderate-High (Some models
granularity (select sub- sectors and source) exclude certain sectors)
sectors) metrics depend
on model and
downscaling)
Advantages • Developed in parallel with the • Australia-specific • Recent.
IPCC, the climate modelling and completed • Can provide very granular data
community, IIASA, and IAMC and by CSIRO. for target setting.
designed to interact with the • Granular data • Some are government-
RCPs. likely available to commissioned.
• Contains socioeconomic Federal
narratives, including Government
assumptions on technology stakeholders for
transfer, global cooperation, use in target
societal preferences, and the setting.
paradigm underpinning global • Robust
development. discussion of
trends.
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IPCC NGFS Australian Others
National Outlook (e.g. AEMO ISP, ClimateWorks
(ANO2) Decarbonisation Futures,
Reputex Powering Australia
Plan)
Disadvantages • Advisable to consider the range • Not the most • Varied modelling quality.
of scenarios and the output of recent, so some • Indirect alignment with global
one SSP across multiple IAMs to policies may not scenario models (e.g. RCP/SSP).
reduce uncertainty. be reflected.
• Depending on sectoral scope of
• Do not explore conditions about • Limited range of the modelling, some scenario
the types and success of global scenarios, using exercises may need to be
and national climate policy. only a single set augmented (e.g. ISP does not
Contain only qualitative of models. include any LULUCF, so this
information about the conditions • Indirect would need additional sources).
described above, and as such alignment with
may not help to quantify certain global scenario
outcomes. models (e.g.
• Do not explicitly explore all low- RCP/SSP).
emission or carbon-dioxide
removal technologies.
• Allow for country-level data on
GDP, population, and
urbanization for certain
countries; other is at a global or
five regions.
Characteristics for assessing physical risks and opportunities
Physical risks assessments require knowing where to look for vulnerabilities or values at risk. This requires you
to have a list of the locations (e.g. city, state, country) you want to assess, ideally with geographic (latitude and
longitude) coordinates. This is essential to have for a quantitative assessment. For a qualitative assessment,
knowing roughly which parts of Australia (or beyond) is sufficient.
The physical climate metrics (Table 11) to analyse in your climate risk and opportunity assessment depend on
the climate risks and opportunities that have been identified earlier.
The metrics listed in this table are common metrics to consider analysing for your climate-related physical risks
and opportunities. Further information on sector specific indices and their mathematical definitions see the
metrics developed by the Expert Team on Climate Change Detection and Indices (ETCCDI) and described at
Climpact, Indices. Sector specific metrics can include growing season length for the agriculture sector, heat
stress indicators for those directly exposed outdoors, wind/solar/wave power potential for renewable energy,
amongst many others.
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Table 11: Recommended physical metrics for climate risk and opportunity assessment.
Physical Climate Physical climate metrics Units

risk type risk/opportunity
driver
Chronic Temperature rise Annual mean temperature °C

Acute Extreme heat Annual number of days where the maximum daily days
frequency temperature is above a threshold (e.g. 30°C, 35°C, 40°C)
Extreme heat Hottest annual maximum temperature °C
intensity
Extreme heat Total time spent annually in heatwaves exceeding 6 days days
duration in length
Extreme cold intensity Coldest annual minimum temperature °C
Extreme cold Annual number of days where the minimum daily days
frequency temperature is below a threshold (e.g. 0°C)
Chronic Rainfall Total annual rainfall mm
Rain days per year where the daily amount is greater than days
1 mm
Acute Drought | extreme Duration of the longest consecutive period without rainfall days
dry duration
Extreme rain intensity Annual maximum amount of rainfall in a single day mm
Extreme rain Annual number of days where the daily rainfall total is days
frequency greater than 20 mm
Flood depth Maximum flood level of the 1-in-100yr flood event m
Acute Extreme fire days Annual number of days where the Fire Weather Index (or days
equivalent) exceeds a threshold (e.g. 95th percentile)
Fire season length Duration of the fire season days
Chronic Sea level rise Relative sea level rise above a baseline period (e.g. 1986- m
2014)
Acute Storm surge Height (historical) of the 1-in-100yr extreme sea level m
event (extreme sea level = mean sea level + high tide +
storm surge + waves)
Return period (future) of the 1-in-100yr extreme sea level years
event (extreme sea level = mean sea level + high tide +
storm surge + waves)
Acute Tropical cyclone Frequency of category 4/5 tropical cyclones count
Storm frequency Annual number of storm events count
Extreme wind Annual maximum wind gust Km/hr
intensity
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The datasets commonly used to assess physical climate risks that come from climate models are multi-
dimensional with unique values for geographic coordinates (latitude and longitude), over time and between
different climate models. This requires use of statistical methods to reduce this dimensionality and also to
examine the changes for the locations (e.g. city, state, country) according to the assessment scope.
Recommendation – Statistical Methods
Do not:
• Select climate models because they tell a convenient story (e.g. ‘our climate risks look less significant if
we use this model’). Climate models are not perfect, they do have biases so only using one model leads
to a greater chance of choosing poorly and making decisions with an incomplete / biased picture.
• Vary statistical methods between climate scenarios and time horizons as it makes comparison difficult.
What you should do:
• Climate is not the same as weather and focuses on the longer-term statistical attributes of weather. This
requires you to look at climate data over 20-to-30-year time periods to account for changes in year-to-
year variability that include both dry years, wet years and more average years.
• Aggregate over multiple climate models and consider the average (or median) value.
• Look at the range (minimum/maximum OR 10th/90th percentile to exclude outliers) to understand the
potential uncertainty but recognise that this adds to the complexity and can challenge decision making.
• Assess confidence: how many models agree on the sign of the change (e.g. do all models suggest it’s
going to get wetter or do only some of them show this?)
• Whichever statistical methods you decide to use, apply them consistently to all climate scenarios and
time horizons so that you can compare between them.
When analysing the physical metrics:
• Assess future climate conditions at each location across at least two future climate scenarios and
two time horizons. How do conditions change between the scenarios and across the portfolio of
locations you are looking at?
• Assess which locations are more exposed to future climate changes. This involves sorting the
future changes across all chosen locations according to those that have the biggest changes through to
those with the smallest. This can help inform which locations need to be a priority for adaptation
measures. Combining future change information with other detail on each location (e.g. population,
property value) can further support prioritisation of the locations requiring more urgent risk
management to reduce exposure and build climate resilience.
Guidance on interpretation of climate data for physical risks and opportunities:
• Look at the future change relative to current climate – where positive values tell you a risk might
increase and negative values a decrease.
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• Look at the range of future changes – if these go from negative to positive values this tells you that
there is uncertainty about whether things will get better or worse.
• Compare the values between the different scenarios and time horizons that you have used as this will
inform a general view on how risks may evolve over more immediate timeframes.
Translating climate data into your assessment context requires additional data inputs from your organisation
and can include asset value, insured value, workforce characteristics, internal data collections on incidents that
are not limited to workplace injury but also service disruption or business continuity. With this internal data,
future impacts can be estimated. Further guidance on this can be provided through the Support Service.
Characteristics for assessing transition risks and opportunities
Metrics to assess transition risks and opportunities (Table 12) include scenario metrics and quantitative internal
data. When analysed with scenario metrics, the extent of transition risk impacts or potential opportunities
assessments can be estimated.
Table 12: Transition metrics for climate risk and opportunity assessment.
Transition Risk theme Scenario metrics Internal data

risk type
Policy Increase price of emissions Emissions (t CO2-e); Carbon Emissions (t CO2-e)

price ($)
Other climate policy and Emissions (t CO2-e); Energy Emissions (t CO2-e); Energy
regulation quantity (MWh/MJ) and mix consumption (MWh/MJ); Energy cost
(%) ($)
Legal Litigation for non- Legal cost ($); Lost revenue Past litigation costs ($)
compliance ($)
Geopolitical risk GDP ($); GSP ($); Sectoral Financial performance (revenue,
activity (%) operating expenditure)
Regulatory Increased cost of Operating cost ($) Current regulatory costs ($)
compliance
Reputation Poor public perception of an Qualitative Stakeholder characteristics
industry, program, or policy
Technology Low emissions energy Energy quantity (MWh) and Emissions (t CO2-e); Energy
supply mix (%); Price ($); Emissions consumption (MWh/MJ); Energy cost
sequestration (t CO2-e) ($)
Capital cost of new Price ($); Sectoral activity (%) Financial performance (operating
technology expenditure); Capital expenditure ($)
Resilience opportunities GDP ($); GSP ($); Sectoral Insurance data ($); Capital expenditure
through technology activity (%) ($)
Market Changing consumer Price ($); Sectoral activity (%) Financial performance (revenue,
shifts preference and behaviours operating expenditure)
Increased supply chain Price ($); Sectoral activity (%) Procurement data (quantity/cost)
costs
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Transition Risk theme Scenario metrics Internal data
risk type
Investment opportunities to Price ($); Sectoral activity (%) Financial performance (revenue,
enable future technologies operating expenditure, capital
expenditure)
Stranded assets from fossil Price ($); Sectoral activity (%) Financial performance (revenue,
fuels operating expenditure, capital
expenditure)
Trade exposure risks International emissions price Financial performance (revenue,
(carbon border tariffs etc.) ($); commodity price ($); operating expenditure, capital
Sectoral activity (%) expenditure)
Workforce requirement Employment by sector; Number, location, and skills of current
Sectoral activity (%); Sector workforce
energy use (%)
Resource Circular economy Qualitative Financial performance (revenue,
and energy opportunities operating expenditure, capital
efficiency expenditure)
potential Energy efficiency Emissions (t CO2-e); Energy Emissions (t CO2-e); Energy
improvements quantity (MWh) and mix (%); consumption (MWh/MJ); Energy cost
Price ($) ($)
When analysing the transition metrics as part of a quantitative assessment:
1. Assess how the metrics vary across at least two future climate scenarios and two future time horizons.
How does the metric change between the scenarios and across the portfolio of locations you are
looking at?
2. Consider the important aspects which are more exposed to future changes. The aspects which are
considered important may be based upon: current emissions and emissions intensity, financial
exposure, the maturity of available decarbonisation options, and their characteristics (services /
products). Understanding and sorting these important aspects can help inform which need to be a
priority for mitigation measures.
Recommendation
Do not use scenarios that are too close together unless the intent is to assess minute changes. It is often more
useful to bookend the assessment within plausible ranges.
Do seek scenarios which explore the range of uncertainty.
Recommended ways to manage uncertainty
According to the IPCC, uncertainty arises due to incomplete knowledge from a lack of information or consensus
about what is and is not known. (See Integrated Risk and Uncertainty Assessment of Climate Change Response
Policies Report for more information.)
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For climate risks and opportunities there can be multiple sources of uncertainty that can challenge decision
making, these are described below and include tips on how to manage them (Table 13).
Table 13: Tips on how to manage different uncertainties that may challenge decision making.
Uncertainty type Description Tips for management
Climate Year-to-year fluctuations in conditions When estimating any future changes always
variability associated with large scale climate base the estimates using multiple years. Ideally,
drivers such as the El Niño Southern for physical risk factors, use at least 20 years of
Oscillation leading to differences in data for a metric to average out the influence of
temperature and rainfall conditions climate variability.
(e.g. wetter years vs drier years).
Observation error Arises from the failure to properly When feasible to do so, consider other sources
observe, measure, or estimate a of evidence. This can include a review of your
quantity. It can arise when applying assessment results or conclusions with IPCC
statistical methods to large datasets reports or the National Climate Risk Assessment
or when limited sampling prevents (to be developed) to understand if your
the ability to have robust estimates. conclusions deviate from the consensus
understanding. This assurance could be
completed by a third-party.
Climate model There are different ways to Always use estimates from multiple climate
mathematically represent the models to counter the limitations in any bulk
processes of the global climate estimates or assumptions that underpin of key
system that can lead to different processes of the global climate system.
results. For example, most climate
models have different assumptions
that need to be met to trigger rainfall
leading to some climate models being
wetter and others drier.
Scenario Between scenarios, the combination Always assess future climate using at least two
of different socio-economic factors distinct scenarios (e.g. one moderate and one
can lead to different outcomes in high emission scenarios) to be able to compare
greenhouse gas emissions and the projected changes and understand the
subsequent levels of global warming range of plausible outcomes.
that lead to different outcomes
globally, and at regional to local
scales.
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Other sources of uncertainty can arise when there is inadequate communication, particularly of objectives or
outcomes of risk management activities. Documentation that clearly articulates essential information and
careful and regular monitoring can minimise these sources of uncertainty.
The IPCC has specific language on confidence levels with climate projections that are described in Mastrandrea
et al., 2010 available at: IPCC Guidance Note for Lead Authors of the IPCC Fifth Assessment Report on
Consistent Treatment of Uncertainties with a recent graphical representation available from the IPCC Sixth
Assessment Report available at: IPCC Sixth Assessment Report, Working Group 1: The Physical Science Basis,
Box 1.1, Figure 1
Risk prioritisation
Risk is often described as a combination of:
1. The likelihood of the risk occurring – often provided in terms of a probability of occurrence with
accompanying descriptions for three or five distinctive ratings (e.g. rare, unlikely, possible, likely, highly
likely).
2. The consequence (i.e. impact) of the risk to the value at risk – which can be grouped into categories
such as financial, reputation, health, safety and wellbeing, business continuity, security and many
others each with different threshold criteria for three to five distinctive ratings (e.g. minor, moderate,
significant, major, catastrophic).
Accounting for the emergence timeframe for each climate risk and opportunity can further support
management decisions and the urgency to act on risks. Common timeframes to consider for climate risks
include short (5-10 years), medium (10-30 years), and long (30-70 years). Ratings should take into account the
role of any existing actions that can reduce either the likelihood or consequence of the risk.
In accordance with ISO 31000 and the Commonwealth Risk Management Policy, your identified risks need to be
prioritised (rated and ranked) based on the risk appetite of your organisation. Risk appetite refers to an
organisation's willingness to avoid, accept, mitigate or transfer the risk (described further in the next chapter).
It is the amount of risk that an organisation is willing to take on to achieve desired outcomes. This will vary for
each organisation.
For organisations, risk appetite is often defined in formal risk management policies and strategies. The level of
risk that an organisation is willing to accept may depend on factors such as the industry they operate in, their
financial position, and their overall risk management philosophy. Understanding risk appetite is important
because it can help individuals and organisations make better decisions about how to allocate their resources,
pursue opportunities, and manage their risks.
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Recommendation
Aligning with your organisation’s existing enterprise management framework or risk management procedure
is recommended because it:
• Allows you to consider these risks in the context of other enterprise risks.
• Helps you prioritise next steps in terms of management actions.
• Can support an awareness of whether there are risks with common actions.
Prioritising risks by current and future state is ideal, because even those risks that have a ‘low’ risk rating today
may become greater in the future – i.e. an emerging risk. These should also be recorded in your Climate Risk
and Opportunities Registers.
Seeking stakeholder inputs
Risk prioritisation workshops are one method to include stakeholder perspectives in risk rating (Table 14 for
options). It can be helpful to create a survey for participants to complete ahead of a workshop that asks them
to individually rate risks. This can provide a more useful aggregated view that avoids ‘groupthink’, which can
then be played back to stakeholders and prompt discussions where there may be diverse perspectives.
Table 14: Alternative options for prioritisation of risks.
Alternative Description
Use provided likelihood and Review the likelihood and consequence categories described in the
consequence guidance procedures of your Enterprise Risk Management Framework. Rate risks
according to your understanding of both their likelihood and consequence –
which can be informed by past experience.).
Use consequence only Humans have an innate tendency to assume the future will be much like the
past, as well as to underestimate the likelihood of events they have not
directly observed before. To overcome this, in a first-pass assessment you
may elect to focus only on how severe the consequences could be for your
organisation should the risk occur.
Figure 6 below presents one approach to depicting how the same risk can evolve over multiple timeframes.
This technique allows stakeholders to move markers on the matrix and reach consensus.
Circulating your risk register with appropriate stakeholders after a risk prioritisation workshop, to confirm their
final ratings, can also build confidence in the process.
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Figure 6: Example risk matrix with likelihood and consequence with five climate risks ranked for both current (black
markers) and future (white markers) climate.
Technical Guidance
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5. Plan and take action
For every risk and opportunity there are likely to be multiple treatment actions that could be pursued. Climate
risk and opportunity management efforts are broadly grouped according to whether they:
• Manage the impacts of climate change via adaptation actions.
• Curb further growth greenhouse gas emissions to reduce contributions to climate change via
mitigation actions, which may include decarbonisation or abatement projects.
Technical guidance in this chapter is split into four themes:
1. Assessing the suitability of proposed actions.

2. Adaptation pathways.
3. Mitigation options.
4. Metrics and targets.
Note that guidance on managing complex and/or shared risks is provided in Chapter 3 Identify your risks and
opportunities.
Involving stakeholders to identify existing and potential actions is a way to speed up the process and limit the
amount of desktop research your team may need to undertake.
To limit stakeholder fatigue, one option can be to ask for suggestions on actions during initial stakeholder
consultations. Ideally, there is benefit at this point to also ask stakeholders about any barriers and enablers for
the adoption of any proposed actions.
At some point, you will need to follow your organisation’s policy and/or procedures that are aligned with the
Public Governance, Performance and Accountability Act 2013 (PGPA Act), for the formal decision of any proposed
actions. This will require sharing documentation and liaising with the appropriate stakeholders within your
organisation that have the delegation to make these approvals.
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Assessing the suitability of proposed actions
To get you started, a useful exercise to complete with the assessment team, and possibly other stakeholders in
a workshop, is to brainstorm a list of known possible actions in response to a risk. Actions can be grouped
according to whether they are preventative measures that can reduce potential impacts through to eliminating
the risk entirely. Additional information of attributes such as the cost, time effort, or shared management
arrangements can also be noted.
Once you have a collated list of actions there are two main approaches, described below, that can be used to
assist with decision making.
Multi-criteria analysis (MCA) provides an approach to screen proposed actions when it is not possible to
quantify and value the main costs and benefits of an action, particularly when appropriate data availability is
lacking. The Optional Excel Template (Actions MCA) is an option to get you started on this to provide an initial
weighted ranking for each possible action.
For more information on multi-criteria analysis see the guide prepared by Infrastructure Australia available at:
Guide to multi-criteria analysis, Technical guide to the Assessment Framework, July 2021.
Although focused on infrastructure assessment, many of the concepts are more broadly applicable.
A more formal economic assessment is often required when specific thresholds relating to the procurement
rules of your organisation are triggered. Cost-benefit analysis is often required for Policy Impact Assessments
and can be useful when there are multiple actions that are resource intensive that require more scrutiny before
any approvals to pursue them are granted.
However, some modification of the approach is often necessary to accommodate both current risks and how
they may evolve with climate change. This includes the below considerations:
• This analysis requires two core data inputs: (1) climate projections data (see Chapter 4) and (2) your
organisation data. Organisational data is needed to inform all cost of consequence assumptions, and if
physical assets are involved, their vulnerability characteristics. Ideally, any assumptions based on
organisational data are dependent on their quality and whether there is sufficient evidence to develop
robust assumptions. For example, if your organisation, or stakeholders, has only been impacted by
floods once before, any assumptions based on one historical flood event will be limited in how robust
they are. To accommodate that circumstance, it is recommended to vary the assumptions to test the
sensitivity of any impact assessment of potential actions.
• Any impact assessment needs to be applied consistently to the current state and to each of the future
climate scenarios at each time horizon. This requires you to have taken a quantitative approach for
climate scenario analysis. The reason for this, is that it will be necessary to understand how much the
costs associated with managing a risk vary between future climate scenarios.
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• The uncertainty that arises between different future climate scenarios and any underpinning
assumptions ideally need to be considered in the context of your organisation’s decision-making
process, risk appetite and organisational objectives.
• Note that costs may not just be limited to financial aspects but could include time, resources, social
acceptance and others where it may be challenging to attach a financial value to them (e.g. statistical
value of a life). Any caveats on data inputs and availability must be clearly in the methodology
accompanying any formal economic analysis.
For more general information on cost-benefit analysis see the guidance prepared by the Prime Minister &
Cabinet - Office of Impact Analysis available at: the Cost Benefit Analysis guidance note 03 August 2023.
For more specific guidance related to infrastructure see the 2022 review report prepared for Infrastructure
Australia available at: Review of Infrastructure Australia's cost-benefit analysis methodology.
Adaptation pathways
A climate adaptation pathways approach is suitable to use in situations where the timing of climate impacts is
uncertain. They do this by linking potential future actions to thresholds and triggers.
Thresholds are specific conditions or limits that indicate when certain impacts or risks become unacceptable or
unsustainable. They help determine when actions should be taken to avoid or reduce potential negative
consequences. Triggers are events or signals that prompt implementation of predetermined actions or
strategies in response to changing conditions. They can be based on various factors, such as specific climate
variables, socio-economic indicators, or ecological thresholds. By setting thresholds and identifying triggers,
stakeholders can determine when specific adaptation strategies should be initiated or adjusted based on
changing conditions or new information.
For example, in coastal areas, a threshold could be a certain level of sea-level rise that leads to frequent
inundation or coastal erosion, making the area unfit for living or economically unsustainable. Triggers could be
specific projections of sea-level rise or occurrences of storm surges that activate actions like constructing sea
walls, relocating infrastructure, or implementing land-use regulations.
Figure 7 below provides an example from the IPCC of how adaptation pathways can be visualised and linked to
a measurable trigger (in this case the amount of recorded global warming).
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Illustrative adaptation pathway for risk of heat-related mortality and morbidity for people and
wildlife in Australia due to heatwaves.
Figure 7: Example depiction of adaptation pathways. Source: Intergovernmental Panel on Climate Change
(IPCC) Sixth Assessment Report – Working Group II, Chapter 11: Australasia available at: IPCC Sixth Assessment
Report, Impacts, Adaptation and Vulnerability, Chapter11: Australasia
There are several resources available online that provide information on adaptation actions. The IPCC Sixth
Assessment Working Group 2: Impacts, Adaptation and Vulnerability Report available at: IPCC Sixth Assessment
Report, Impacts, Adaptation and Vulnerability, Climate Change 2022: Impacts, Adaptation and Vulnerability
report provides a comprehensive synthesis of peer-reviewed adaptation research that can be used as a starting
point to find further information on specific topics. There are other resources split according to specific sectors
where some of these are listed below. There is also a specific focus on climate resilience available at: IPCC
Climate-Resilient Pathways: Adaptation, Mitigation, and Sustainable Development Chapter 20.
National strategy
DCCEEW’s National Climate Resilience and Adaptation Strategy 2021 to 2025 details Australia’s objectives in
enabling more effective adaptation across four domains – natural, built, social, and economic. Learn more: the
National Climate Resilience and Adaptation Strategy 2021-2025 document.
Public health
More severe and frequent severe weather events will challenge the wellbeing of the Australian population. Not
only are individuals experiencing increased exposure to physical harm, the reduction of recovery between
climate impacts is challenging their mental wellbeing. NSW Health have collated a range of resources and
publications which support professionals and consumers regarding this available at: Mental health and climate
change resources.
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Agriculture
Funded by the Federal Future Drought Fund, the Drought Resilience Self Assessment Tool (DR.SAT) helps the
agriculture sector in adapting and building preparedness for future uncertainties in climate by harnessing
leading climate and adaptation science to provide suggestions and supplement existing resilience building
initiatives. Learn more at: Dr. SAT Assess your farms resilience website.
Coastal assets
CoastAdapt is an information delivery and decision support framework with a focus on Australia’s coastal
regions that allows understanding of climate change risks and what can be done to respond to those risks.
Learn more at: the Coast Adapt website.
Infrastructure
The National Construction Code details Australia’s minimum requirements for buildings’ safety, health,
amenity, accessibility, and sustainability standards. As many of these will be affected by the changing climate,
these construction principles should be referred to in testing infrastructure decisions or strategies against the
future climate. Learn more at: the National Construction Code website. The Department of Foreign Affairs and
Trade program on Building Climate-resilient Infrastructure details Australia’s key support mechanisms aimed
toward supporting the Indo-Pacific in constructing climate-resilient infrastructure. Learn more at: Supporting
the Indo-Pacific to tackle climate change website.
Disaster risk reduction
The National Disaster Risk Reduction Framework highlights an agreement between the Commonwealth of
Australia and the States and Territories in mutual commitments and the recognition that they have a mutual
interest in improving outcomes to reduce disaster risk. Learn more: the Australian Government Department of
Home Affairs, National Disaster Risk Reduction Framework document weblink.
Mitigation – decarbonisation and abatement options

The climate is changing rapidly in response to increasing concentrations of atmospheric greenhouse gases.
Mitigation of climate change involves the reduction of current greenhouse gas emissions from human activity
(decarbonisation), or the removal of it from the atmosphere (abatement).
Recognising that there is already further warming committed to our global climate system, reducing the
concentration of greenhouse gases in the atmosphere will reduce the rate and severity of climate change,
decreasing the future risks and economic damages from climate events.
Policy outcomes can have multiple objectives that aspire to shift national development pathways, approaches
toward implementing mitigation of climate impacts can include shifting incentives and enabling transition.
These approaches can also be framed differently, whether there is a focus on shifting marginal incentives or
drive larger complex transitions. Together, the approaches and framing showcase the climate policy landscape
(Table 15).
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Table 15: The approaches to and framing of the climate policy landscape.
Approaches to policy making against the framing of the outcome:

Enhancing mitigation Addressing multiple objectives of mitigation and
development
Shifting Objective: Reducing current Objective: Synergies between mitigation and national
incentives greenhouse gas emissions development
Australian policy examples: Australian policy examples:
• Emissions Reduction Fund • Australia’s Sustainable Forest Management

• Climate Active
• Renewable Energy Target scheme
Enhancing Objective: Accelerate to a low-carbon Objective: Accelerate system transitions and shift
transition economy in an orderly way development pathways to expand mitigation options
Australian policy examples: and meet other development goals
Australian policy examples:
• National Electric Vehicle Strategy
• The National Reconstruction Fund
• Rewiring the Nation policy
There are several resources available online that provide information on mitigation actions. The IPCC Sixth
Assessment Working Group 3: Mitigation of Climate Change Report available at: IPCC Sixth Assessment Report
Working Group 3: Mitigation of Climate Change, Climate Change 2022: Mitigation of Climate Change webpage.
provides a comprehensive synthesis of peer-reviewed climate mitigation research that can be used as a
starting point to find further information on specific topics. There are other resources split according to specific
sectors where some of these are listed below.
The Australian Government’s commitment to addressing climate change
The Department of the Prime Minister and Cabinet has outlined the Australian Government’s commitments to
addressing climate change with mitigation efforts. Learn more: Environment and Adaptation webpage.
Australia’s Emission Reduction Plan
Australia is committed to achieving net zero emissions before 2050, the Long-Term Emissions Reduction Plan
highlights how Australia will drive down the cost of low emissions technologies, deploy these technologies at
scale, help regional industries and communities seize opportunities in new and traditional markets, and work
with other countries on the technologies needed to decarbonise the world’s economy. Learn more: the
Australian Government Department of Climate Change, Energy, the Environment and Water, Climate Change,
Australia’s Long-Term Emissions Reduction Plan.
Agriculture
Agriculture is a major sector in Australia and a major greenhouse gas emitter. For example, livestock are a
major source of methane emission. The Department of Agriculture, Fisheries, and Forestry details a range of
Technical Guidance
58
resources which describe Australia’s commitments in mitigation in this sector at: the Emissions Reduction and
the agricultural sector webpage.
Research and development can aid in Australia’s mitigation efforts. For example, FutureFeed is a supplement
made from native Australian seaweed for grazing animals aimed to reduce their methane emissions. This
supplement is being developed by The Commonwealth Scientific and Industrial Research Organisation (CSIRO).
Learn more at: CSIRO Animals, Livestock, Future Feed webpage.
Regenerative agriculture is an approach focused on restoring or enhancing the ecosystem of a farm to increase
soil and landscape health. This not only increases agriculture production, but also the delivery of benefits for
the broader community including an increase in soil organic carbon, better nutrition supply for crops, and
improved root growth and below grown plant carbon. Learn more from The NSW Department of Primary
Industries: Agriculture Pastures and rangelands, Pasture establishment and management, Regenerative
Agriculture webpage.
To learn more about the Australian Government’s commitment to supporting the agriculture sector on the
challenges arising from climate change see the National Statement on Climate Change and Agriculture: the
National Statement on Climate Change and Agriculture digital story.
Reforestation and afforestation
Trees can be planted to directly remove greenhouse gases from the atmosphere. Two main methods include
reforestation and afforestation, which involve planting trees in areas that were recently (reforestation), or
never (afforestation), covered with trees. The Clean Energy Regulator details this as an opportunity for the land
sector and provides insights into the relevant resources, regulatory guidance, and legislative requirements to
earn Australian carbon credit units (ACCUs). Lean more: Reforestation and Afforestation.
Carbon Capture and Storage (CCS)
Emerging technology can be used to aid in the mitigation effort. CCS includes technology which directly
removes carbon dioxide from the atmosphere and stores it permanently deep underground. Geoscience
Australia, along with the Department of Industry, Science, Energy, and Resources (DISR is the parent
department) have had an active role in developing CCS for 20 years. Learn more: Carbon Capture and Storage
(CCS), Geoscience Australia.
Transport infrastructure
The transition away from fossil fuel and private transport can help in the mitigation effort. Renewable energy
powered electric vehicles (EV) aim to reduce emissions associated with traditional combustion vehicles,
although this is not true if the electricity is generated by burning of fossil fuels. The Department of Climate
Change, Energy, the Environment, and Water have outlined the Australian government’s National Electric
Vehicle Strategy to increase the supply of affordable and accessible EVs, establish the resources, systems, and
infrastructure to enable rapid EV uptake, and encourage increased EV demand. Learn more: The National
Electric Vehicle Strategy.
Technical Guidance
59
Metrics and targets
Metrics help measure and monitor progress on actions over time and can be developed in the form of targets,
thresholds, and/or triggers for a specific metric that is appropriate. Developing targeted metrics for each item
outlined in any implementation action plan will support the accountability and transparency obligations of your
organisation.
To support the measurement of metrics you will need to determine:

• What aspects you expect are directly measurable.
• What data sources or ancillary information you require, including how and who will acquire and process
this data.
• How frequently the data source is updated and does it meet your requirements.
• Are there any limitations or caveats with the data, including implicit assumptions that may affect how
you may use the data.
• Are there instances where proxies may be required to substitute where data availability is a limitation
and what is the tolerance for this to be considered within your organisational context.
Metrics to consider are contingent on what climate risks and opportunities were identified, assessed, and
prioritised in steps 3 and 4 of the Application Guides. Some examples on what to consider, and potential
targets, are included in Table 16.
Table 16: Examples of metrics to consider in relation to climate risks and opportunities.
Metric category Example target
Greenhouse gas (GHG) emissions (Scope 1, 2 and 3) both The Australian Government has set a target for non-
absolute terms and intensity and can be further split into corporate entities to reach Net Zero by 2030 excluding
different categories (e.g. electricity, transport, waste). security agencies. Any further targets need to align
and be agreed with Department of Finance (e.g.
achieve emissions reductions of XX% compared to a
baseline year of your choosing).
The proportion of assets or business activities vulnerable Reduce the percentage of asset value exposed to a
to physical or transition risks. physical or transition risk by XX% by 2030 relative to a
baseline year of your choosing.
Proportion of revenue spent on activities aimed at Increase renewable energy usage to reach XX% of
building climate resilience and can be further split electricity usage by a future year of your choosing.
separately into adaptation and mitigation efforts.
To help get you started on appropriate metrics and targets commonly used with climate risks and opportunities,
consider the guidance from the Task Force on Climate-related Financial Disclosures (TCFD) - Guidance on Metrics,
Targets and Transition plans document.
For more sector specific guidance on appropriate metrics to consider, see the preliminary guidance developed by the
International Financial Reporting Standards (IFRS) Foundation to support disclosure requirements underpinning by
the International Sustainability Standards Board (ISSB) available at: IFRS, Completed projects, Climate-related
disclosure, Appendix B - Industry based disclosure requirements.
Technical Guidance
60
6. Monitor, evaluate and communicate
Regular monitoring of progress can inform when actions may be achieving the intended outcomes ahead of
time or when they are not and may require additional intervention measures to limit inefficiencies or
maladaptation. Key attributes to document within any implementation action plan, or a separate monitoring
and evaluation plan (for multiple risks) include:
• The purpose – what is being monitored and why.
• Appropriate detail on the allocation of resources required and timing expectations on how long
ongoing monitoring will take place and the frequency to which progress is evaluated.
• Who will be accountable for managing and executing the monitoring and evaluation activities (e.g. a
division within your organisation, a specific role or team).
• Who (e.g. senior stakeholders, committees) will need to be regularly updated on progress and what are
the reporting requirements that need to be fulfilled.
• Documentation on analysis methodology and data sources to be used to measure progress including
any implicit assumptions.
• Determine thresholds for the metrics to be used to measure progress in conjunction with the
anticipated timeframe that you are monitoring that can indicate whether progress is ahead of track, on
track or falling behind schedule.
• What supplementary actions can be triggered if progress is not on track.
• Determine the review procedure and frequency for making any interim changes to any impact or
likelihood ratings within your risk register that align with your KPIs.
Technical guidance in this chapter is split into two themes including:
1. Periodic review.
2. Reporting and assurance.
Awareness of any material climate risks and opportunities amongst senior stakeholders within your
organisation is important so that they can inform any forthcoming strategic planning and decisions where the
risks may have potential impacts on the outcomes.
Technical Guidance
61
Periodic review
Periodic reviews of all risks and opportunities should already be an existing practice within the risk
management function of your organisation and will ideally involve a committee that has the delegation to
make decisions on any changes to risks or opportunities including any existing or proposed actions for their
management. Any material climate risks and opportunities need to be reported to the committee and senior
stakeholders following your organisation’s governance structure to ensure their effective management going
forwards.
Changes in circumstances across multiple factors including both socio-economic and physical climate, may
require you to query the effectiveness and performance of actions at an earlier stage than your regular
cadence for reviewing risks. Changes in Commonwealth entities arising from Machinery of Government can
also bring challenges and will require a review of your risk register to understand potential for new risks to be
considered by your organisation.
Existing data collection systems that capture any incidents or other attributes (e.g. financial costs) commonly
associated with the climate risks that you identified can be useful for:
• Alerting if an early review of a risk and its associated management actions is required out of the regular
risk review cycle.
• Supporting monitoring of progress of actions aimed at reducing risks (e.g. reduced numbers of WHS
incidents arising during extreme heat events due to new workplace policy aimed at reducing employee
exposure).
• Alerting that risk actions are not achieving the desired outcomes and require a recalibration of
resources to effectively manage the risk.
Example
Questions to consider when reviewing progress on managing your climate risks & opportunities include:
• Has there been any change in climate, including the frequency and/or severity of extreme
weather events?
For example, over 2021 and 2022, wetter conditions have resulted in more flood events experienced across
multiple locations across Australia that have impacted your organisation’s activities / areas of responsibility
that requires you to revisit the likelihood and consequence ratings of any risks that are associated with flood
events.
• Are your actions reducing potential impacts?

For example, to reduce cooling requirements during hot periods your organisation has decided to increase the
energy efficiency and retrofit existing facilities. A pilot at one facility demonstrated lower energy usage over
the summer quarter with improved internal temperature controls indicating the potential benefits.
• Are your strategic objectives still achievable?

For example, you may have a strategy to reduce the greenhouse gas emissions associated with a specific
Technical Guidance
62
activity by your organisation that involves the purchase of offsets that have now been deemed ineffective and
challenge the ability to meet your targets.
• Has there been a change in external circumstances that may challenge the efficacy of your risk
management actions?
For example, to reduce your exposure to supply chain disruptions arising from severe weather events, your
organisation now sources critical materials from more geographically diversified suppliers. However, conflict
emerging from these new suppliers has introduced new logistical challenges not anticipated.
• Have unintended consequences emerged in pursuit of managing your climate risks and
opportunities?
For example, in pursuit of low emissions technology a strategic decision was made to replace all fleet vehicles
with EVs however there is insufficient battery storage to support overnight charging leading to indirect
emissions by using fossil fuel sources to charge them in the interim.
Reporting and assurance

Climate risk should be addressed in the organisations existing enterprise risk management framework to
further embed climate risk and opportunities into the governance and decision-making procedures of the
organisation.
Particular attention should be given to the key controls designed to manage climate risks. The more effective a
control is in its design and operation, the greater assurance that the associated risk is being managed
effectively. Reviewing and validating controls provides an element of confidence that the controls in place are
operating effectively and rectify any deficiencies.
The regularity of reviewing and validating control effectiveness could depend on the following factors:
1. The critical nature of the control – a risk with severe inherent consequences and a high likelihood may
require a more frequent review of its control effectiveness to provide greater assurance that the risk is
not realised.
2. The risk appetite and tolerance of an entity – the lower the risk appetite and tolerance, the greater the
need may be for more frequent control reviews.
Each organisation must have a clear escalation and reporting process with clear lines of accountability which
should already be clearly defined in the organisation’s governance structure.
There are specific situations in which climate risks should be escalated and reported:
1. When the risk assessment is not within the risk appetite and risk tolerance as determined by the
organisation accountable authority. This requires escalation and reporting of the risk treatment plan
required to bring risk back to within appetite.
2. When emerging risks are identified that require additional resilience or preparedness to be established
requiring Board or Executive deliberations and directions.
It is also important that the organisation is aware of the climate disclosure requirements that are relevant.
Technical Guidance
63
7. Disclose
Please note: Step 7 will be updated once Australian disclosure requirements are finalised and a standard is
developed. The below is general guidance and does not reflect reporting requirements for Commonwealth entities
and companies.
The purpose of disclosing climate risks and opportunities is to provide transparency and accountability to the
public on how an organisation is responding to the challenges arising from climate change, seizing
opportunities to build climate resilience, and improving decision-making processes by considering any climate
implications.
Globally, more jurisdictions are requiring mandatory climate disclosures from both public and private sectors
with criteria that often align to the TCFD and the ISSB. In June 2023 the inaugural International Sustainability
Standards Board (ISSB) S1 and S2 Standards were published. The ISSB Standards fully incorporate the TCFD
recommendations and from 2024 the TCFD’s monitoring responsibilities will be transferred to ISSB. The
recommendations for ISSB disclosures are grouped under four themes including:
1. Governance: Disclose your organisation’s governance around climate risks and opportunities,
including oversight by senior leadership and their role in assessing and managing climate risks and
opportunities.
2. Strategy: Disclose the actual and potential impacts of material climate risks and opportunities on your
organisation’s activities, policies, programs.
3. Risk management: Disclose the processes for your organisation to identify, assess, and manage
climate risks and opportunities.
4. Metrics and targets: Disclose the metrics and targets used by your organisation to assess and manage
climate risks and opportunities.
To prepare the materials for a disclosure report, including these themes, will require:
• Using the outputs from multiple steps described in the Climate Risk Management Application Guides.
• Coordinating input from your organisation’s internal risk management team and, if it exists, any teams
whose work is tangentially involved in climate change and the emissions reporting requirements
underpinned by APS Net Zero and implementation of the Commonwealth Risk Management Policy.
• Seek clearance and executive input and ensure that the content is both appropriate and compliant –
this will require engaging with your Legal team and SES.
Technical Guidance
64
Alternative text for images
Figure 1: Hierarchy of work packages and resources available through the Climate Risk and
Opportunity Management Program
Climate Risk Management Guide documents are one component of the Climate Risk and Opportunity
Management Program. These include the Organisation Application Guide, Program, Project and Policy
Application Guide, and the New Policy Proposal Application Guide. These three application guides are
supported by the Technical Guide and Climate Risk Management Template. There are other Climate Risk and
Opportunity supporting resources which are the Learning & Development Modules (APS Academy), the Climate
Risk Support Service, and the Climate Risk Digital Tool.
Please return to Introduction > Who should use this Technical Guidance and why?
Figure 2: The core steps of the Climate Risk Management Guide and key definitions. ‘Climate risk’
refers to both physical and transition risks.
A process wheel of the 7 core steps of climate risk management: 1. Scope the Assessment, 2. Consider current
and future state, 3. Identify your risks and opportunities, 4. Prioritise risks & opportunities, 5. Plan and take
action to manage risks and pursue opportunities, 6. Monitor, evaluate & communicate, 7. Disclose.
Definitions:
• Physical risks: Physical risks are associated with the direct impacts of rising global temperatures and
can be described as acute (e.g. heatwaves) and chronic risks (e.g. droughts).
• Physical opportunities: Physical changes in climate may also present some opportunities. For example,
to mitigate the effects of temperature rise and extreme heat can lead to better urban planning and
design.
• Transition risks: Transition risks result from the extensive policy, legal, technology and market changes
associated with the transition to a low-carbon economy (e.g. changing consumer preferences; changes
to the industrial mix)
• Transition opportunities: Significant opportunities for Australia are already emerging as the global
economy transitions to net zero. Effective policy settings from the Australian Government could see
billions of dollars invested in key sectors across the economy.
Please return to Introduction > Navigating this guide
Figure 3: Summary of recent high-impact events from different type of physical risk drivers that also
had broader transition risk implications
Timeline of key events from 2017-2022. Includes 2017-20 extreme drought in NSW and QLD, 2019-20 Black
Summer bushfires in NSW,QLD, VIC, SA, Canberra hailstorms, Lismore floods/
Please return to 2. Current and Future State > For transition risks and opportunities, drivers are often grouped
according to policy,
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65
Figure 4: Components of a risk statement with worked examples to illustrate the nuance between the
concepts of values at risk, impact and consequence when drafting climate risk and opportunity
statements.
Steps of a risk statement: 1. Risk driver - can include either physical hazards or transition factors in pursuit of a
low carbon future. 2. Values at risk - can include organisational goals or objectives, desired outcomes from a
policy or program, stakeholders or assets. 3. Impact - a description of how the value(s) at risk could be affected
by the risk driver. 4. Consequence - the implications for your organisation if the risk or opportunity were to
occur. 5. Risk or opportunity statement - a concise description of how the value at risk could be impacts
(positively or negatively) by the risk driver, and the consequences of this.
An example risk statement is: Risk factors - extreme heat, Values - workforce productivity, Impact - heat stress,
Consequence - productivity losses due to increased incidence of staff illness, risk statement - (physical) reduced
workforce productivity for employees working from home, the office or while commuting to/from work during
extreme heat events.
Please return to 3. Identify your risks and opportunities > Table 6 illustrates examples of how….
Figure 5: Types of complex risk explained

• Aggregate risks involve multiple unrelated risks occurring simultaneously or in quick succession. E.g.
bushfire damaging property + storms damaging transmission lines + flash flooding impeding transport
networks.
• Compound risks involve multiple risks interacting for greater impacts. E.g. bushfire felling timber and debris
in waterways -> fallen timber and debris contaminating water.
• Risks can compound bidirectionally for more complex impacts. e.g., drought and lack of vegetation
contributing to soil erosion <-> poor soil quality impacting vegetation growth.
Cascading risks involve one risk triggering others. e.g., severe drought causing extreme dry conditions for long
periods -> severe bushfires due to extreme hot and dry conditions -> leading to both severe loss of biodiversity
AND mental health toll on individuals.
Please return to 3. Identify your risks and opportunities > Shared risks are those risks that extend either across
divisions…
Figure 6: Example risk matrix with likelihood and consequence with five climate risks ranked for both
current and future climate.
Example risk matrix to assist in determining risk rating. Risk matrix has ‘likelihood’ on the x-axis, and
‘consequence’ on the y-axis. When likelihood is negligible and consequence is insignificant, the risk rating is
low. When likelihood is almost certain and consequence in catastrophic, the risk rating is extreme.
Example 1: Limited access to critical components and material required to implement the low emissions
solutions required to meet ambitious emission reduction targets. This leads to the inability to achieve
increasingly ambitious emissions reduction targets. Initial placement based on current state assessment is
High 19. Placemat based on how projected climate change may shift risk exposure is Extreme 25.
Example 2: Shortage of critical skills and workforce required to implement the low emissions solutions required
to meet ambitious emissions reduction targets. This leads to the inability to achieve increasingly ambitious
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66
emission reduction targets. Initial placement based on current state assessment is Medium 13. Placement
based on how project climate change may shift risk exposure is High 17.
Example 3: Increased WHS incidents/claims for employees working from home, the office or while commuting
to/from work during extreme weather events. Initial placement based on current state assessment is Low 3.
Placement based on how projected climate change may shift risk exposure is Medium 9.
Example 4: Increased risk of damage of critical infrastructure, contributing to major operational disruptions
and productivity losses due to increased frequency and severity of floods, bushfires and extreme weather.
Initial placement based on current state assessment is High 17. Placement based on how projected climate
change may shift risk exposure is High 19.
Example 5: Increased risk of supply chain disruption of materials required for operational activities due to
remote extreme weather events affecting traditional transportation routes. Initial placement based on current
state assessment is Medium 13. Placement based on how project climate change may shift risk exposure is
High 15.
Please return to Step 5: Plan and take action.
Figure 7: Example depiction of adaptation pathways.
Decision trigger points as temperatures increase.
For example, Improvements in healthcare services has a decision point at 1degree and another at 1.9degrees.
At 1.9degress, heath warning systems in tandem with improved healthcare services will be activated.
Please return to Step 5: Plan and take action > There are several resources available online…
Technical Guidance
67

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Climate Risk Management

This publication is available at DCCEEW Publications.

Department of Climate Change, Energy, the Environment and

Who should use this Technical Guidance and why? 4

Navigating this guide 6

1. Scope the assessment 13

Governance and APS responsibilities 14

Stakeholder engagement methods 14

Stakeholder briefing template 17

2. Consider current and future state 21

Common impact categories 26

3. Identify your risks and opportunities 28

Complex and shared risks 32

4. Prioritise risks and opportunities 36

5. Plan and take action 53

Mitigation – decarbonisation and abatement options 57

Metrics and targets 60

6. Monitor, evaluate and communicate 61

Reporting and assurance 63

Who should use this Technical Guidance and why?

Control Measures taken to regulate the likelihood or consequence of a risk. May

Emissions scenarios (also Representative estimates of future emissions of greenhouse gases,

Exposure The presence of people, livelihoods, ecosystems, services, resources,

Greenwashing False or misleading claims made by an organisation on the environmental

Likelihood The probability of an event or risk occurring.

Maturity Refers to an organisation’s level of capability, performance, and

• Capitalising on gains from transition risk (e.g. new market opportunities).

• Acute – risks from changes in the frequency and severity of extreme

Risk The effect of uncertainty on objectives. Risk is often expressed in terms of a

• Organisational goals or strategic objectives.

Technical guidance for this step is split into three themes:

Governance and APS responsibilities

1. Commonwealth Risk Management Policy

Stakeholder engagement methods

Suggestions on the types of stakeholders to consider include:

Engagement Where could this approach be Description of method Benefits

Surveys Steps 2, 3 and 4 described in the Involves circulating a • A systematic approach to

• Describe objectives of the workshop in the context of your

• Set expectations for the participants.

• Allow participants to suggest additional risks.

• Discuss any known potential impacts associated with each

• Prioritise all risks according to their likelihood and consequence – can

• Discuss new actions that could be pursued.

• Develop strategic choices to minimising risk or optimising

8 Next steps and close • List actions to follow up on post workshop.

• Determine roles and responsibilities for these actions.

• Offer participants opportunity to provide feedback to evaluate

For more resources on stakeholder engagement:

Stakeholder briefing template

Describe the purpose of engaging the stakeholder

WE are representing ORGANISATION NAME to understand the potential impact of

Background and Objectives

Describe the essential context

"The purpose of this process is to understand ORGANISATION NAME exposure to

The objective of conducting the stakeholder interviews is to understand historical

What do we mean by climate risks and opportunities?

• Transition risks relate to the implications of pursuing the transition of our

Suggested discussion focus points

e. Has ORGANISATION NAME taken any control measures or implemented risk

i. Does your ORGANISATION NAME governing board or executive leadership