CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Risk Management
The Risk Management Committee of Anand Steels Ltd. wants to test how its portfolio would perform if average temperatures rise sharply and carbon taxes triple by 2040, comparing outcomes under several such futures. Which tool is the committee using?
The committee is using climate scenario analysis. It assesses how the business would perform under different plausible future climate pathways, such as higher temperatures or heavier carbon taxes, helping the board test strategic resilience. It is forward-looking, unlike audits or reconciliations that review past or recorded information.
- AClimate scenario analysisCorrect
- BStatutory secretarial audit
- CMateriality-free sampling
- DRelated party reconciliation
Explanation
Scenario analysis explores how the business would fare under different plausible future climate pathways, helping assess resilience and strategy. It is not an audit or reconciliation exercise. It is forward-looking and used for both physical and transition risks.
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