GARP SCR Exam : Sustainability and Climate Risk

Leaders of an energy company meet to address physical and transition risks to company operations. At the meeting, the CRO recommends a strategy to mitigate physical climate risk to the company. Which of the following strategies will the CRO most likely recommend?

• A. Reinforce flood defenses for power plants along rivers.
• B. Participate in a carbon trading scheme with peer companies.
• C. Develop a net-zero plan informed by peer company strategies.
• D. Provide professional development for the local workforce.

An ESG scorecard for sovereign debt issuers has the following information:
Country 1No carbon policy and high corruption risk
Country 2High-level carbon policy and low corruption risk
Country 3Detailed carbon policy and low corruption risk
Based only on this information, the country with the lowest ESG risk is:

• A. Country 3
• B. Country 2
• C. Country 1.

A large real estate investment firm increases resources to understand transition and physical risks as it expands into markets with climate regulations and increasing flooding events. Senior leadership requires the risk team train all business units in understanding how both climate risks can impact operations.
During this process, how should the risk team define commonalities between both risks?

• A. The timing of impacts from each risk type will follow similar trajectories.
• B. The majority of impacts from each risk type will manifest after 2050.
• C. Renewable energy investment returns will likely increase as each risk type grows.
• D. Each risk type can lead to stranded assets of investee companies.

A technology company expands its sustainable offerings and develops a flight booking application that allows customers to offset a flight's carbon emissions. An analyst at the company researches climate agreements to inform the structure of the offsetting program.
How does the analyst describe the achievements and shortcomings of the agreements?

• A. Although COP1 (Berlin) ended with no binding treaty, it was the first COP to establish a goal that global warming remains below 2°C.
• B. The main achievement of COP15 (Copenhagen) was the creation of the IPCC, an influential scientific body that became the leading body in guiding subsequent climate agreements.
• C. COP3 (Kyoto) resulted in differentiated national responsibilities wherein developing countries were not subject to emissions reduction obligations, which disincentivized Annex 1 countries to take action.
• D. A shortcoming of COP21 (Paris) is that countries are legally obligated to annually submit nationally determined contributions (NDCs), and most have kept NDCs at unchanged levels.

A risk consultant begins an engagement for a development agency. The engagement focuses on identifying policies that address climate change impacts. The consultant drafts an action plan that incorporates a roadmap of effective climate policies to present to senior directors at a strategic meeting. The plan includes an introductory summary of the backdrop and effectiveness of historical and current climate policies.
How should the consultant describe the context of climate policy evolution?

• A. The first attempts to create international climate policies and accords focused on emissions reductions occurred in the 1970s, as anthropogenic GHG emissions were globally recognized as fact by scientists.
• B. After the World Climate Summit, global climate policy legally required countries responsible for the greatest share of cumulative emissions to cut back emissions the most.
• C. Evidence from the past two decades has accumulated that warming levels will lead to tipping points, supporting an international consensus and policies around a goal of limiting warming to 2.5°C.
• D. As global mean annual temperatures rose significantly in the 1980s, scientific consensus around human influence on climate solidified, leading to the formation of the IPCC.