Which of the following represents a transition risk?

Question

BlackTom AI · Accepted Answer

Transition risks arise from the process of adjusting to a low‑carbon economy—these include policy, legal, technology, market, and reputational shifts that can change asset values, cost structures, and business models.

1) Relevant knowledge points and concepts
- Climate risks are commonly split into physical risks (direct impacts from weather/climate) and transition risks (risks from societal, regulatory, and market responses to climate change). 
- Transition risks: new regulations or carbon pricing, rapid technological change, shifts in consumer preferences, litigation, and reputational impacts.

2) Step‑by‑step reasoning
- Evaluate each option against the definition of transition risk.
  a) Occurrence of extreme weather events: this is a direct impact of climate and fits the “physical risk” category (acute events like floods, storms, or chronic changes like sea‑level rise).
  b) Policy change to encourage low‑carbon technologies: this is a regulatory/policy shift intended to facilitate transition to a low‑carbon economy—this directly exemplifies transition risk because it alters incentives, costs, and market dynamics for firms.
  c) Breakdowns in business supply chains: while supply‑chain disruptions are an operational risk, they are not inherently a transition risk. They could result from physical events (e.g., a storm damaging a supplier) or from sudden regulatory changes, but on its face “breakdowns in supply chains” are not the policy/market/technology change that defines transition risk.

3) Intermediate reasoning steps (no numeric calculations required)
- Map each option to risk category: extreme weather → physical risk; policy change to low‑carbon tech → transition risk; supply‑chain breakdown → operational/physical (context‑dependent) risk.

4) Why the correct answer is correct
- The policy change option is a classic transition risk: new policies encouraging low‑carbon technologies change the competitive and regulatory landscape and can impose costs or create winners and losers among firms.

5) Why other options are incorrect
- Extreme weather events are physical climate risks, not transition risks.
- Supply‑chain breakdowns describe operational disruptions and only sometimes result from transition actions; they are not themselves an archetypal transition risk.

6) Conclusion
Therefore, the correct answer is "Policy change to encourage low‑carbon technologies." This matches the provided correct answer.

Which of the following represents a transition risk?单项选择题

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