Chapter 08 · Finance, data & evidenceSustainable Finance & Investment
Climate Value at Risk
Definition
Climate Value at Risk expresses the potential change in the value of an asset, company or investment portfolio arising from physical climate hazards and transition risks, typically modelled as a function of vulnerability, hazard and exposure and discounted to a present value. Commercial implementations, such as MSCI's Climate VaR, cover tens of thousands of companies.
References
vulnerability × hazard × exposure formulation; physical vs transition CVaR; MSCI coverage; regulatory stress tests
definition and asset-specific thresholds
Overview
What it means
It translates scenario-based climate analysis into a single percentage of value at stake, making climate risk comparable across holdings.
How it is used
Investors use it for portfolio screening, TCFD/ISSB-aligned reporting and regulatory climate stress tests such as those run by the ECB and the Bank of England.
Why it matters
It is becoming a standard language between climate science and financial decision-making. - **Note:** It is a screening metric built on modelled scenarios and assumptions, not a forecast; results differ materially between providers and should not be read as precise predictions.