Table 1.

Examples of climate-related financial risk by transmission channel, risk type, and subsector

		Credit	Market	Liquidity	Operational	Reputational
Physical	Banking	Loan defaults resulting from disruption costs for climate-exposed borrowers and impairment of collateral assets	Valuation uncertainty for climate-exposed assets	Interruption of electronic payment systems and associated demand for cash reserves	Business interruption or liability costs for climate-exposed locations or supply chains	Customer dissatisfaction with climate hazard mitigations
	Investment	Bond defaults resulting from disruption costs for climate-exposed issuers	Volatility in stocks, bonds, and derivatives for climate-exposed industries, regions, and underlying assets	Fire sales for climate-exposed assets	Business interruption or liability costs for climate-exposed locations or supply chains	Customer dissatisfaction with climate hazard mitigations
	Insurance	Large-scale correlated claims for climate-exposed property and casualty policyholders due to increasingly frequent and severe acute and chronic climate hazards			Risk transfers to reinsurers and government insurers of last resort for climate-exposed underwriting	Customer dissatisfaction with climate hazard mitigations
Transition	Banking	Loan defaults resulting from technology- or policy-driven transition costs for carbon-intensive borrowers	Valuation uncertainty for carbon-intensive (or transition-enabling) assets	Rapid draw down of deposits or credit lines for counterparties affected by climate change mitigation or adaptation policies	Legal and compliance costs associated with carbon-intensive lending portfolios	Decreased shareholder value due to deficiencies in climate risk management
	Investment	Bond defaults resulting from technology- or policy-driven transition costs for carbon-intensive issuers	Abrupt price corrections in stocks and bonds for carbon-intensive industries and economies	Fire sales for assets affected by climate change mitigation or adaptation policies	Legal and compliance costs associated with carbon-intensive investment portfolios	Decreased shareholder value due to deficiencies in climate risk management
	Insurance	Premia mispricing for carbon-intensive (or transition-enabling) policyholders given uncertainty around climate change mitigation and adaptation policies and technologies			Risk transfers to reinsurers and government insurers of last resort for carbon-intensive underwriting	Decreased shareholder value due to deficiencies in climate risk management