Storylines: A science‐based method for assessing and measuring future physical climate‐related financial risk

Author:

Fiedler Tanya12ORCID,Wood Nick3,R Grose Michael4ORCID,J Pitman Andy5ORCID

Affiliation:

1. UNSW Institute for Climate Risk and Response Sydney NSW Australia

2. School of Accounting Auditing & Taxation UNSW Sydney NSW Australia

3. Climate Policy Research Sydney NSW Australia

4. CSIRO Climate Science Centre Hobart TAS Australia

5. ARC Centre of Excellence for Climate Extremes UNSW Sydney NSW Australia

Abstract

AbstractRegulators increasingly require organisations to disclose their climate‐related financial risks. Most future physical climate risks present unique challenges, however, as their likely occurrence and consequence cannot be quantified with veracity at business‐relevant scales. Quantitative measurement thus renders preparers vulnerable to false precision, maladaptation, and litigation. We present an alternative method for assessing future physical climate‐related financial risk developed in the climate sciences, namely “storylines” (Shepherd et al., 2018). Storylines emphasise plausibility over probability, illustrate legally defensible and auditable futures, and allow the full expression of uncertainty. We conclude with recommendations and implications for integrating storylines into existing standards, frameworks and practice.

Publisher

Wiley

Reference103 articles.

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2. AASB&AUASB. (2018)Climate‐related and other emerging risks disclosures: assessing financial statement materiality using AASB Practice Statement 2. Available from:https://www.aasb.gov.au/admin/file/content102/c3/AASB_AUASB_Joint_Bulletin_13122018_final.pdf[Accessed 13th June 2024].

3. AASB&AUASB. (2019)Climate‐related and other emerging risks disclosures: assessing financial statement materiality using AASB/IASB – Practice Statement 2(Issue April). Availale from:https://www.aasb.gov.au/admin/file/content102/c3/AASB_AUASB_Joint_Bulletin_Finished.pdf[Accessed 13th June 2024].

4. AEMO. (2021)National electricity market fact sheet. Available from:https://aemo.com.au/‐/media/files/electricity/nem/national‐electricity‐market‐fact‐sheet.pdf[Accessed 13th June 2024].

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