Transition Risk

Transition risks are financial risks arising from the process of adjusting to a lower-carbon economy. They include policy risks (carbon taxes, emission caps, regulation), technology risks (disruptive clean technologies), market risks (shifting consumer preferences, stranded assets), and reputational risks (stakeholder concerns about climate action). Transition risk assessment is central to TCFD, ISSB (IFRS S2), and CSRD climate disclosures. Scenario analysis under different warming pathways (1.5°C, 2°C, 3°C+) quantifies these risks.