2020

Sustainability
and Climate Risk
(SCR™) Certificate
Study Guide and
Learning Objectives
2020 SCR™ Study Guide and Learning Objectives

TOPIC OUTLINE, READINGS, SCR EXAM APPROACH

TEST WEIGHTINGS The SCR Exam is practice-oriented. The questions
The Study Guide and Learning Objectives document are derived from a combination of theory, as
sets forth the primary topics and subtopics covered set forth in the readings, and “real-world” work
in the SCR Exam. These topics were determined experience. Candidates are expected to understand
by the SCR Advisory Committee to be essential sustainability and climate risk concepts and
for the field of sustainability and climate risk. The approaches, as well as the ways in which they would
topics and their respective weightings are reviewed apply to a candidate’s day-to-day activities.
yearly to ensure the Exam is timely and relevant. The curriculum covers the essential skills and
The Study Guide and Learning Objectives document knowledge areas necessary for individuals and
also contains a full list of all the readings that are organizations to succeed in today’s rapidly changing
recommended as preparation for the SCR Exam. risk-laden landscape.

Key concepts appear as bullet points at the It constitutes an increasingly referenced and ever-
beginning of each section and are intended to expanding spectrum of risk-planning standards from
help candidates identify the major themes and which practitioners can learn and understand the
knowledge areas associated with that section, and intricate nature of the sustainability and climate risk
individual learning objectives are provided for each landscape. As such, the Exam is comprehensive in
reading. Since every SCR Exam question maps to at nature, testing a candidate on a number of sought-
least one learning objective, the SCR Study Guide after SCR standards and mechanisms.
and Learning Objectives document is an important
study resource and should be referred to regularly READINGS
during exam preparation.
Questions for the SCR Exam are related to and
supported by the readings listed under each topic
outline. These readings were selected by the SCR
Advisory Committee to assist candidates in their
review of the subjects covered by the Exam. It is
strongly suggested that candidates review these
readings in depth prior to sitting for the Exam.
All the readings listed in the SCR Study Guide are
available through GARP. Further information can be
found on the GARP website.
SCR STUDY MODULES
MODULE 1:
FOUNDATIONS OF CLIMATE CHANGE: SCIENCE AND GLOBAL RESPONSE....3

MODULE 2:
POLICY, REGULATIONS, AND IMPLICATIONS........................................................ 6

MODULE 3:
GREEN AND SUSTAINABLE FINANCE: INSTRUMENTS AND MARKETS...........10

MODULE 4:
CLIMATE RISK MEASUREMENTAND MANAGEMENT........................................... 13

MODULE 5:
CLIMATE SCENARIO ANALYSIS............................................................................... 18

MODULE 6:
CURRENT ISSUES IN SUSTAINABILITYAND CLIMATE RISK............................... 20
Module 1: Foundations of Climate Change:
Science and Global Response
EXAM WEIGHT | 20% (FCC)

TOPICS AND READINGS

This area focuses on foundational concepts of climate change, the underlying science, and global
responses. Knowledge of these concepts is fundamental to understanding the context of policy and
regulatory changes and financial risk implications explored in this program. This module explains various
scientific and environmental processes to make them accessible to readers with and without scientific
backgrounds. The knowledge points covered in Foundations of Climate Change: Science and Global Response
include the following:

• Introduction to Earth science systems: greenhouse effect, global warming, and climate change
• Carbon emissions, sequestration, greenhouse gas (GHG) scenarios, and tipping points
• History and evolution of past and present climate accords
• Integrated Assessment Models (IAMs)

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings
to the knowledge points follows in the descriptions below.

Reading 1 contains three chapters covering the basics of climate change. The first gives a broad overview of
climate science basics, describing how the different earth science systems form the foundational basis for
understanding climate. The second chapter focuses on the relationship between extreme weather and climate
change, along with the associated effects on the Earth. Lastly, the third chapter briefly discusses the role of
clean energy, carbon sequestration, and other methods in reducing atmospheric carbon.

The next two readings (Readings 2 and 3) describe the history of climate change policy over the past two
centuries, with a focus on the formal and informal international accords. Reading 2 focuses on the formation
and history up to and including the Kyoto Protocol, while Reading 3 examines the strengths, challenges, and
opportunities associated with the 2015 Paris Accord.

Reading 4 presents the Intergovernmental Panel on Climate Change (IPCC) 2013 summary for policymakers,
which explains the complexity of diverse technical climate change assessments to a non-scientific audience.
The reading addresses the various biogeochemical changes caused by climate change and discusses the
predictions produced by different climate models. Lastly, the examples used within the summary are key to
understanding how the science connects with the actions, goals, and programs discussed in later modules.

Reading 5 introduces IAMs, which integrate the capabilities of several individual models into singular
technological suites. The reading explains how IAMs allow practitioners to create more accurate forecasts
than simply using independent standalone models.

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The readings that you should focus on for this section and the specific learning objectives that should be achieved
with each reading are as follows:

1. Romm, J. J. (2016). Climate Change: What Everyone Needs to Know (1st ed.) New York, NY: Oxford
University Press.
Chapter 1: Climate Science Basics [FCC-1]
After completing this reading you should be able to:
• Explain the greenhouse effect and how it warms the Earth.
• Define global warming and explain its relationship to both the naturally occurring and human-
enhanced greenhouse effects.
• Identify and describe the main contributors to sea-level rise.
• Define greenhouse gases and describe their connection to human activity and energy use.
• Describe the impacts of human activity and fossil fuel development on climate patterns and variables.

Chapter 2: Extreme Weather and Climate Change [FCC-2]

After completing this reading you should be able to:
• Explain the cyclical, meteorological, and temporal relationships between weather and climate.
• Distinguish between the components of weather, climate, and their interrelationships.
• Interpret how climate change affects precipitation patterns, storm surges, ice melt, and wildfires.
• Describe the impact of climate change on the Arctic.

Chapter 6: The Role of Clean Energy (Excerpt) (pages 208-214 only) [FCC-3]
After completing this reading you should be able to:
• Explain the process of carbon capture and storage and its role in reducing atmospheric CO2.
• Describe the state of existing carbon sequestration technologies and the opportunities for their future
development and deployment.

2. Gupta, J. (2010). A history of international climate change policy. Wiley Interdisciplinary Reviews:
Climate Change, 1(5), (pages 636–653). doi: 10.1002/wcc.67 [FCC-4]
After completing this reading you should be able to:
• Describe the birth and evolution of climate accords in the late 20th and early 21st centuries.
• Assess the achievements and shortcomings of the agreements.
• Analyze countries' obligations after joining various climate accords.

3. Falkner, R. (2016). The Paris Agreement and the new logic of international climate politics. International
Affairs, 92(5), (pages 1107–1125). doi: 10.1111/1468-2346.12708 [FCC-5]
After completing this reading you should be able to:
• Compare climate change policies and goals from pre-Paris Accords to those implemented in the
Paris Agreement.
• Identify and analyze the mechanisms in the Paris Accords to reduce emissions and promote
sustainable development.

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4. IPCC Intergovernmental Panel on Climate Change. (2013). Climate Change 2013: The Physical Science
Basis. Summary for Policymakers, Technical Summary and Frequently Asked Questions. (pages 3–29).
WMO & UNEP. [FCC-6]
After completing this reading you should be able to:
• Describe the observed atmospheric, oceanic, carbon cycle, and biogeochemical cycle-based changes
observed within the global climate system.
• Understand the drivers of climate change and explain the relationship between these drivers and the
aforementioned cycles and systems.
• Evaluate the rationale for the different types of climate models and explain the justification for the
models’ varying levels of certainty.
• Assess the attributions of, and correlations between, human influence on the environment and global
climate change.
• Describe the relationship between sea-level rise and climate stabilization.

5. Hare, B., Brecha, R., and Schaeffer, M. (2018). Integrated Assessment Models: what are they and how do
they arrive at their conclusions? (Executive Summary, pages 1–12). Climate Analytics. [FCC-7]
After completing this reading you should be able to:
• Describe the uses and limitations of IAMs.
• Identify and explain the three scientific sources of information from which IAMs are derived.
• Describe the application of the results obtained by IAMs in relation to the goals of the
• Paris Agreement.
• Explain the benefits of using an IAM approach to guide the fulfillment of the Paris Agreement’s goals.

OPTIONAL READINGS:

The readings below provide additional information and perspectives on the topics covered in this module.
However, candidates will not be tested on these readings.

IPCC. Summary for Policymakers. (2018). Global Warming of 1.5°C. An IPCC Special Report on the
impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas
emission pathways, in the context of strengthening the global response to the threat of climate
change, sustainable development, and efforts to eradicate poverty. (pages 1-24).

United Nations. (2019). Summary for policymakers of the global assessment report on biodiversity and
ecosystem services of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem
Services. (pages 1-45).

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Module 2: Policy, Regulations, and Implications
EXAM WEIGHT | 20% (PRI)

TOPICS AND READINGS

This area firstly contextualizes climate risk within the broader setting of sustainability. The module then
presents the responses of financial institutions, regulators, and international bodies to emerging climate risks.
These responses include key frameworks, formulated policies, recommended best practices, and guiding
principles. The knowledge points covered in Policy, Regulations, and Implications include the following:

• Sustainable Development Goals (SDGs) • Network for Greening the Financial System
• Environmental, Social, and Governance (ESG) (NGFS) best practices
reporting frameworks, scorings, and ratings • Greenhouse gas (GHG) emissions accounting
• Principles for Responsible Investment and reporting principles
• Principles for Responsible Banking • Carbon pricing: taxes, trading, credits,
• Climate-related financial disclosures and leakage

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings
to the knowledge points follows in the descriptions below.

Reading 6 outlines the 17 United Nations SDGs, which serve as a universal framework for achieving
sustainability. Readings 7 and 8 are supporting readings for the SDGs, exploring the progress towards their
fulfillment with respect to the 2030 Agenda for Sustainable Development. These readings also discuss new
approaches to development financing and the current demographic issues and sustainability challenges that
each SDG aims to address.

Reading 9 views sustainability from a different lens by subdividing the topic into environmental, social, and
governance factors. Institutional investors, asset managers, financial institutions, and other stakeholders
increasingly rely on ESG performance in assessing and comparing firms. The reading describes various
organizations and ESG data providers that have developed methodologies for scoring and rating corporations
and sectors in the spirit of good governance and transparency. Readings 10 and 11 outline the principles that
institutional investors and banks should follow in order to align their strategies and practices with the SDGs.

Financial reporting is another means for understanding company-specific ESG performance, and Reading
12 examines the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD) with
regards to climate-related reporting. It explains how both financial and non-financial sectors would gain from
proper disclosure and outlines the steps for effective disclosure about climate-related risks.

Reading 13 presents the recommendations of the NGFS on how central banks, supervisors, policymakers,
and financial institutions can better manage climate-related risks. These recommendations reflect the best
practices identified by NGFS members to facilitate the role of the financial sector in achieving the objectives
of the Paris Agreement.

Reading 14 contains three chapters. The first gives an overview of generally accepted GHG accounting and
reporting principles that serve as a global standard to ensure that an entity’s reported information represents
a true and fair account of the company’s emissions. The second chapter illustrates the two approaches that
companies can use in consolidating GHG emissions with respect to organizational or legal structure. The third
chapter addresses the identification of GHG emissions associated with a firm’s operations and introduces the
three “scopes” approach (scopes 1, 2, 3) for transparent GHG accounting and reporting.

Lastly, Reading 15 provides a macro view of GHG emissions and tackles the performance and effectiveness
of carbon pricing, such as through carbon taxes and emission trading systems (ETS), in the pursuit of cost-
effective GHG emission reduction for national and regional territories.

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The readings that you should focus on for this section and the specific learning objectives that should be achieved with
each reading are as follows:

6. GRI and UN Global Compact. (2017). Business Reporting on the SDGs: An Analysis of the Goals and
Targets. (pages 1–7). [PRI-1]
After completing this reading you should be able to:
• Describe the United Nations SDGs and their specific targets.

7. United Nations Sustainable Development Group. (2019). Foundational Primer on the 2030 Agenda for
Sustainable Development (pages 7–8, 10). [PRI-2]
After completing this reading you should be able to:
• Identify the key features and goals of the 2030 Agenda for Sustainable Development.
• Describe potential new approaches to development financing.

8. United Nations. (2015). Sustainable Development Goals: Fact Sheet (pages 1–9). [PRI-3]
After completing this reading you should be able to:
• Describe the global material sustainability issues that each SDG aims to address.

9. PRI. (2017). Principles for Responsible Investment: An investor initiative in partnership with UNEP
Finance Initiative and the UN Global Compact (pages 4–7). UNEP Finance Initiative and United Nations
Global Compact. [PRI-4]
After completing this reading you should be able to:
• Describe how responsible investment approaches consider ESG issues with investment decision-
making and ownership practices.
• Identify the six principles of responsible investment and potential ways to achieve them.

10. UNEP and PRI. (2019). Principles for Responsible Banking: Guidance Document (pages 2–27). UNEP
Finance Initiative and Principles for Responsible Banking. [PRI-5]
After completing this reading you should be able to:
• Explain the requirements and suggested measures to take for each principle of responsible banking.
• Understand and describe how banks have implemented the responsible banking principles, along with
the benefits of implementing these principles.

11. TCFD. (2017). Final Report: Recommendations of the Task Force on Climate-related Financial
Disclosures. (pages 13–23). [PRI-6]
After completing this reading you should be able to:
• Identify the scope of coverage of the TCFD recommendations.
• Describe the necessary principles to follow for effective TCFD implementation.
• Identify the four core elements of climate-related financial disclosure and the recommended types of
information that should be disclosed or considered for each.
• Identify the financial and non-financial industries for which supplemental guidance was developed.

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12. NGFS. (2019). A call for action: Climate change as a source of financial risk (pages 1–7). Network for
Greening the Financial System. [PRI-7]
After completing this reading you should be able to:
• Describe the six NGFS recommendations for central banks, supervisors, policymakers, and financial
institutions to manage environmental and climate-related risks.
• Explain how the NGFS recommendations can guide the financial sector in achieving the objectives of
the Paris Agreement.

13. World Business Council for Sustainable Development and World Resources Institute. (2004).
The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard.
Chapter 1: GHG Accounting and Reporting Principles (pages 6-9) [PRI-8]
After completing this reading you should be able to:
• Describe the generally accepted GHG accounting and reporting principles.

Chapter 3: Setting Organizational Boundaries (pages 16-23) [PRI-9]

After completing this reading you should be able to:
• Explain the two distinct approaches that can be used to consolidate GHG emissions.
• Assess the differences in the approaches to GHG accounting and GHG reporting when consolidating
GHG data.

Chapter 4: Setting Operational Boundaries (pages 24-33) [PRI-10]

After completing this reading you should be able to:
• Explain the concept of boundaries in operational GHG accounting (Scopes 1, 2, 3).
• Describe the definitional coverage of Scopes 1, 2, and 3, along with their respective roles in delineating
emission sources in GHG accounting.

14. Haites, E. (2018). Carbon taxes and greenhouse gas emissions trading systems: what have we learned?
Climate Policy, 18(8), (pages 955–966). doi: 10.1080/14693062.2018.1492897 [PRI-11]
After completing this reading you should be able to:
• Describe how carbon taxes and emission trading systems contribute to economic efficiency.
• Compare the two types of emission trading systems.
• Explain the issue of carbon leakage.
• Describe and compare different carbon pricing methods.

15. Huber, B. M., Comstock, M., Davis Polk and Wardwell LLP. (27 July 2017). ESG Reports and Ratings:
What They Are, Why They Matter. Harvard Law School Forum on Corporate Governance and Financial
Regulation. (pages 1-14).* [PRI-12]
After completing this reading you should be able to:
• Compare the methodologies, scope, and coverage of existing ESG reporting and rating providers.
• Describe the ESG exchange-traded funds (ETFs) and portfolios present in the market.

*The link for this reading is available on the GARP website.

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OPTIONAL READINGS:

The readings below provide additional information and perspectives on the topics covered in this module.
However, candidates will not be tested on these readings.

Climate Disclosure Standards Board. (2018). Uncharted waters: How can companies use financial
accounting standards to deliver on the Task Force on Climate-related Financial Disclosures'
recommendations? (pages 2–15).

SASB. (2018). Insurance: Sustainability Accounting Standard (Industry Standard, pages 4–24).
Sustainability Accounting Standards Board.

Bose, S., Bridges, A., and DeFrancia, K. (2019). Carbon Pricing as a Policy Instrument to Decarbonize
Economies (pages 1–44). The Earth Institute at Columbia University and Enel Foundation.

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Module 3: Green and Sustainable Finance:
Instruments and Markets
EXAM WEIGHT | 15% (GSF)

TOPICS AND READINGS

This area focuses on the emergence of financial sector tools and markets born out of the global response to
climate change. The module tests your knowledge of what constitutes “green” finance, existing taxonomies,
and the range of financial products and instruments for financing sustainability and climate projects. The
knowledge points in Green and Sustainable Finance: Instruments and Markets include the following:

• Defining what is “green”

• Existing and emerging global taxonomies
• Green bonds, green loans, and other products
• Climate finance trends, instruments, and sources

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings
to the knowledge points follows in the descriptions below.

Reading 16 presents a basis for evaluating the definitions of “green” in the context of green finance. It covers
the varying definitions of green instruments across multiple asset classes and sectors.

Reading 17 identifies a gap in the adoption of green definitions and argues for the development of consistent
approaches toward identifying eligible green and sustainable assets within the taxonomies of China and the
EU. Reading 18 compares the definitions and characteristics of green loans and sustainability-linked loans and
their respective principles.

In order to paint a picture of the growing green bond markets, Reading 19 provides an analysis of the climate-
aligned bond universe and describes the trends in bond issuance for sectors such as clean energy and waste
management. It also provides a timely overview of the diversity of green bond structures.

Currently, green bond guidelines are being implemented across the globe to support issuers and investors in
selecting and reporting on suitable projects. Readings 20, 21, and 22 describe the principles for green, social,
and sustainability bonds and provide guidance on their issuance and best uses.

Reading 23 explores climate finance and the current state of global climate flows. It provides an analysis on
the global flow of financing toward low-carbon and climate-resilient actions globally and includes findings on
the funding sources for climate mitigation and adaptation projects.

Finally, Reading 24 focuses on carbon emission reduction in corporate credit portfolios through the use of
green investments and derivatives that can generate credit alpha for portfolio managers. A new risk-based
approach to measuring CO2 reduction in credit portfolios is also introduced.

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The readings that you should focus on for this section and the specific learning objectives that should be achieved with
each reading are as follows:

16. Kahlenborn, W., Cochu, A., Georgiev, I., Eisinger, F., and Hogg, D. (2017). Defining "green" in the
context of green finance (pages 1-19). European Commission. [GSF-1]
After completing this reading you should be able to:
• Describe the existing global approaches to defining “green” in the context of green finance.
• Evaluate definitions of “green” for targeted and untargeted financing, including green bonds, green
lending, green listed equity, green equity indices, and green themed funds.

17. Climate Bonds Initiative. (2019). Comparing China's Green Bond Endorsed Project Catalogue
and the Green Industry Guiding Catalogue with the EU Sustainable Finance Taxonomy (Part 1)
(pages 1–6). [GSF-2]
After completing this reading you should be able to:
• Identify the differences in green definitions across Europe and China.
• Compare the guiding principles, users, classifications, and screening criteria among the various
green taxonomies.
• Compare the Industry Catalogue, the Project Catalogue, and the EU Taxonomy in terms of scope and
environmental objectives.

18. Filkova, M. (2018). Bonds and Climate Change: The State of the Market 2018. (pages 1–32). Climate
Bonds Initiative and HSBC. [GSF-3]
After completing this reading you should be able to:
• Describe the landscape of climate-aligned outstanding bonds.
• Identify opportunities and uses for green bond issuance.
• Differentiate between the different green bond structures.
• Assess the market for green bonds, green bond issuance, and green bond issuers.
• Describe current public sector developments in green bond issuance and standards.

19. ICMA - International Capital Markets Association. (2018). Green Bond Principles: Voluntary Process
Guidelines for Issuing Green Bonds (pages 1–8). [GSF-4]
After completing this reading you should be able to:
• Explain the definition and purpose of a green bond.
• Explain the core components of the Green Bond Principles.
• Identify the types of projects green bonds are used for in the global market.
• Describe the significance of a green bond external review provider.

20. ICMA - International Capital Markets Association. (2018). Social Bond Principles: Voluntary Process
Guidelines for Issuing Social Bonds (pages 1–8). Paris. [GSF-5]
After completing this reading you should be able to:
• Explain the definition and purpose of a social bond.
• Explain the core components of the Social Bond Principles.
• Identify the types of projects social bonds are used for in the global market.
• Describe the significance of a social bond external review provider.

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21. ICMA - International Capital Markets Association. (2018). Sustainability Bond Guidelines (pages 1–4).
Paris. [GSF-6]
After completing this reading you should be able to:
• Describe the hybrid nature and definition of sustainability bonds.

22. Buchner, B. K., Oliver, P., Wang, X., Carswell, C., Meattle, C., and Mazza, F. (2017). Global Landscape of
Climate Finance 2017: A CPI Report (pages 1–16). CPI: Climate Policy Initiative. [GSF-7]
After completing this reading you should be able to:
• Describe the current state of international climate finance flows.
• Identify the sources of climate finance and the financial instruments that drive investment in low
carbon and climate-resilient projects.
• Differentiate between private and public climate finance flows.
• Describe the current trends in the mitigation and adaptation sectors of global climate finance.

23. Erlandsson, U. (2017). Credit Alpha and CO2 Reduction: A Portfolio Manager Perspective. SSRN
Electronic Journal (pages 1-24). https://doi.org/10.2139/ssrn.2987772 [GSF-8]
After completing this reading you should be able to:
• Identify the challenges in traditional CO2 benchmarking of credit portfolios.
• Describe the ECOBAR model and apply it to sample historical data.
• Illustrate the potential for low-CO2 strategies in a variety of operational and mainstream credit
trading settings.

24. LSTA. (2019). 8 Things You Need To Know About Sustainable Finance (pages 1–2).* [GSF-9]
After completing this reading you should be able to:
• Explain the green and sustainability-linked loan principles set forth by the LSTA, LMA, and APLMA.
• Distinguish between green loans and sustainability-linked loans.
• Describe the growth in the green and sustainable loan markets.
• Describe the argued benefits of sustainable finance to borrowers and lenders.

*The link for this reading is available on the GARP website.

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Module 4: Climate Risk Measurement
and Management
EXAM WEIGHT | 20% (CRMM)

TOPICS AND READINGS

This module focuses on the risks from climate change and the approaches for measuring and managing these
risks. The knowledge points in Climate Risk Measurement and Management include the following:

• Climate transmission channels

• Physical risks and opportunities
- Acute
- Chronic
• Transition risks and opportunities
- Policy and legal
- Technology
- Market
- Reputational
• Manifestation in traditional risk types
• Climate change risk governance
• Risk management: ESG and sustainability
• Approaches to measuring climate-related risks
• Credit risk assessment and measurement
• Climate-related metrics and tools

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings
to the knowledge points follows in the descriptions below.

Climate change can result in financial risk impacts for organizations. The financial risks from climate change
arise through two primary channels: physical and transition. Reading 25 introduces the physical and transition
risks and opportunities that can arise from climate change. The reading explains how these climate-related
risks and opportunities can impact an organization’s future financial position, as reflected in its income
statement, cash flow statement, and balance sheet. Reading 26 further explores how transition and physical
risk can affect different types of firms and explains how climate risk is a “transverse risk”.

Practitioners need to consider how climate-driven financial risks can be embedded into current financial risk
management frameworks. Reading 27 explores the different aspects of risk management that are impacted
by climate change and how firms can incorporate financial risks from climate change into existing risk
management practice. Reading 28 discusses the ways in which climate change affects banks’ borrowers and
the financial performance of various sectors, along with the steps banks can take to evaluate climate risk in
loan portfolios. The reading also describes the role of insurance as a risk mitigant, and the climate change
impacts on real estate default probabilities and loan-to-value ratios.

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Reading 29 explores the manifestation of climate risk in traditional risk types, explains how climate risks
translate into credit risk, and describes the challenges in estimating the credit risk impact of climate change.
Reading 30 introduces the concept of “stranded assets” and the causes of asset stranding, as well as the
approaches that can be used to manage the risk of stranded assets. Reading 31 evaluates exposures to
carbon risk and the financial impacts of carbon asset risk.

Reading 32 describes the climate-related risks and opportunities of which boards need to be made aware.
The reading explains how trustees and boards can obtain information about climate-related risks that a
portfolio is exposed to and the climate change risks that boards need to manage. Various climate-related
metrics and tools to assess portfolio alignment with a less than 2°C scenario are also described. Reading 33
focuses on the various ESG-related risks that may impact an entity and the investor interest in ESG-related
risks. The reading explores how Enterprise Risk Management (ERM) principles and practices can be applied
to manage ESG-related risks and describes the Committee of Sponsoring Organizations of the Treadway
Commission’s (COSO’s) Enterprise Risk Management Framework.

A discussion of the responsibilities of companies and directors in relation to climate change follows in
Reading 34. The possible liability issues concerning the TCFD recommendations and the legal barriers
to TCFD-compliance are further explored. Reading 35 describes the range of available methodologies to
assess the climate risks and opportunities. A discussion of the metrics and approaches that can support
investors and asset managers for integrating climate considerations into investment decisions follows.
Recommendations for investors seeking to implement climate-related risk measurement are analyzed,
as well as processes for screening climate-related risks.

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The readings that you should focus on for this section and the specific learning objectives that should be achieved
with each reading are as follows:

25. Task Force on Climate-Related Financial Disclosures. (2017). Implementing the Recommendations of
the Task Force on Climate-related Financial Disclosures (pages 4–9, 71–77). [CRMM-1]
After completing this reading you should be able to:
• Identify and describe the physical and transition climate-related risks.
• Describe the opportunities for organizations that can arise from climate change.
• Describe how climate-related risks and opportunities can impact an organization’s future financial
position, as reflected in its income statement, cash flow statement, and balance sheet.

26. Paisley, J., and Nelson, M. (2019). Climate Risk Management at Financial Firms: Challenges and
Opportunities (pages 2–13). New Jersey: GARP: Global Association of Risk Professionals. [CRMM-2]
After completing this reading you should be able to:
• Explain how climate risk is a “transverse risk.”
• Explain how transition and physical risk can affect firms and lead to financial risk.

27. Bank of England: Prudential Regulation Authority. (2019). Supervisory Statement SS3/19 - Enhancing
banks’ and insurers’ approaches to managing the financial risks from climate change (pages 4–8).
London. [CRMM-3]
After completing this reading you should be able to:
• Explain how climate change could be incorporated into the different aspects of risk management, such
as risk identification, measurement, and monitoring.

28. Connell, R., Firth, J., Baglee, A., Haworth, A., Steeves, J., Fouvet, C., and Hamaker-Taylor, R. (2018).
Navigating a New Climate: Assessing Credit Risk and Opportunity in a Changing Climate: Outputs
of a Working Group of 16 Banks Piloting the TCFD Recommendations - Part 2 Physical Risks and
Opportunities. (pages 11-27) Finance UNEP Initiative. [CRMM-4]
After completing this reading you should be able to:
• Explain how climate change can affect banks’ borrowers and the financial performance of various
sectors in direct and indirect ways.
• Describe how banks can take steps to evaluate climate risk in loan portfolios.
• Assess the role of insurance as a risk mitigant for extreme climate and weather events.
• Explain the climate-related changes in sector productivities and their impacts on default probabilities.
• Analyze climate change impacts on loan-to-value ratios using real estate methodology.

29. Monnin, P. (2018). Integrating Climate Risks into Credit Risk Assessment - Current Methodologies
and the Case of Central Banks Corporate Bond Purchases (pages 2-23) SSRN Electronic Journal.
doi: 10.2139/ssrn.3350918 [CRMM-5]
After completing this reading you should be able to:
• Explain how climate risks translate into credit risks.
• Describe the methodological challenges in estimating the credit risk impact of climate change.
• Illustrate the economic impact of various climate change scenarios and low-carbon economy transition
scenarios on debtors.

2020 SCR Certificate Study Guide and Learning Objectives garp.org/scr 15

30. Caldecott, B., Harnett, E., Cojoianu, T., Kok, I., and Pfeiffer, A. (2016). Stranded Assets: A Climate Risk
Challenge (pages 1–31; A. R. Rios, ed.). Inter-American Development Bank. [CRMM-6]
After completing this reading you should be able to:
• Describe the concept and causes of asset stranding.
• Describe the approaches to manage the risk of stranded assets.

31. WRI and UNEP-FI Portfolio Carbon Initiative. (2015). Carbon Asset Risk: Discussion Framework
(pages 21–47). [CRMM-7]
After completing this reading you should be able to:
• Describe exposures to carbon risk at the sector and company level.
• Explain the process for evaluating the financial impacts of carbon asset risks.
• Illustrate the pathways toward managing carbon asset risk along the with roles of various stakeholders.

32. IIGCC: The Institutional Investors Group on Climate Change. (2018). Addressing climate risks and
opportunities in the investment process: A practical guide for trustees and boards of asset owner
organisations (pages 7–39). [CRMM-8]
After completing this reading you should be able to:
• Illustrate the link between climate change and fiduciary duty.
• Describe the main climate-related risks and opportunities that boards need to recognize.
• Identify the transition risks and physical risks of climate change that boards need to manage.
• Describe the different climate-related metrics and tools to assess the carbon footprint of a portfolio
alignment with a less than 2°C scenario.

33. Committee of Sponsoring Organizations of the Treadway Commission (COSO) and World
Business Council for Sustainable Development (WBCSD). (2018). Enterprise Risk Management:
Applying enterprise risk management to environmental, social and governance-related risks
(pages 7–10). [CRMM-9]
After completing this reading you should be able to:
• Explain the various ESG-related risks that may impact an organization.
• Describe investor interest in ESG-related risks.
• Explain how ERM principles and practices can be applied to manage ESG-related risks.

34. Staker, A., Garton, A., and Barker, S. (2017). Concerns misplaced: Will compliance with the TCFD
recommendations really expose companies and directors to liability risk? Commonwealth Climate and
Law Initiative (pages 3–17). [CRMM-10]
After completing this reading you should be able to:
• Describe the liability issues concerning the TCFD recommendations and assess the legal barriers to
TCFD compliance.
• Explain how compliance with the TCFD recommendations affects liability risk.

35. Swiss Sustainable Finance. (2019). Measuring Climate-Related Risks in Investment Portfolios. Zurich.
(pages 1–10). [CRMM-11]
After completing this reading you should be able to:
• Illustrate the range of available methodologies to assess any identified climate risks and opportunities.
• Describe the metrics and approaches that can support investors and asset managers in integrating
climate risks and opportunities into their investment decisions.
• Describe the recommendations for investors seeking to implement climate-related risk measurement.
• Explain the process for screening climate-related risks.

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OPTIONAL READING:

The reading below provides additional information and perspectives on the topics covered in this module.
However, candidates will not be tested on this reading.

Connell, R., Firth, J., Baglee, A., Haworth, A., Steeves, J., Fouvet, C. F., and Hamaker-Taylor, R. (2018).
Navigating a New Climate - Assessing credit risk and opportunity in a changing climate: Outputs of a
working group of 16 banks piloting the TCFD Recommendations. Finance UNEP Initiative (pages 29–52).

2020 SCR Certificate Study Guide and Learning Objectives garp.org/scr 17

Module 5: Climate Scenario Analysis
EXAM WEIGHT | 15% (CSA)

TOPICS AND READINGS

This module focuses on the development and application of climate scenario analysis, the types of scenarios
that exist, and what information they can provide. The knowledge points in Climate Scenario Analysis include
the following:

• Climate scenario development

• Developing and applying scenario analysis
• Transition and physical climate scenarios

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings
to the knowledge points follows in the descriptions below.

Scenario analysis evaluates a range of hypothetical outcomes by considering plausible future scenarios
under specific assumptions and constraints. Climate scenario analysis allows organizations to explore an
understanding of how climate-related risks and opportunities may impact a business over time. Reading
36 describes how organizations use climate-related scenario analysis. It explores how to develop and apply
scenario analysis, how to build climate change into scenario analysis, the required tools and data, and the
challenges and benefits to performing scenario analysis. The reading also provides an overview of the
common climate-related scenarios (e.g., “transition scenarios” and “physical climate scenarios”) used by the
international scientific community.

A guide for institutional investors on climate scenario analysis shapes Reading 37. The objectives of scenario
analysis and the financial risks and opportunities of the various approaches of scenario analysis are explored.
The methodologies that seek to use scenarios as a basis for analyzing investments are described, followed by
a discussion on the range of actions that investors may consider after reviewing scenario outcomes.

Reading 38 explains how scenarios are used for transition risk assessment. The three main methods of
modeling transition risk are identified and described and are followed by a discussion of lessons learned
from bank piloting, supported by case studies and results. Lastly, an evaluation of transition opportunities,
including opportunity assessments in scenario analysis and market segment attractiveness, is provided.

Reading 39 begins with an analysis of incorporating the TCFD recommendations for scenario-based risk
assessment in investors’ financial disclosures. An assessment of the available methodologies for climate-
related scenario analysis, including scenario design and physical and transition risk assessment, follows.
The reading then delineates the process to guide individual investors on how to design and structure the
application or the use of scenario-analysis within their own institutions. Lastly, the reading describes the
framework to calculate the Climate Value at Risk (CVaR) metric for equities, bonds, and real estate assets.

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The readings that you should focus on for this section and the specific learning objectives that should be achieved with
each reading are as follows:

36. TCFD. (2017). Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-Related
Risks and Opportunities (pages 1–29). [CSA-1]
After completing this reading you should be able to:
• Define climate-related scenarios and describe how they are used by organizations.
• Explain how to develop and apply scenario analysis, including the considerations for incorporating
climate change into scenario analysis, analytical choices, tools and data, as well as the associated
challenges and benefits.
• Describe some of the common global climate-related scenarios (e.g., “transition scenarios” and
“physical climate scenarios”) used by the scientific community.

37. IIGCC: The Institutional Investors Group on Climate Change. (2019). Navigating climate scenario
analysis: A guide for institutional investors. London (pages 15–53). [CSA-2]
After completing this reading you should be able to:
• Explain the different objectives of scenario analysis.
• Describe “reference scenarios” and how they are used in investment analysis.
• Illustrate the methodologies that use scenarios as a basis for analyzing investments.
• Discuss the points to consider when reviewing analysis outcomes and the range of actions that
investors may consider after a review.

38. UNEP Finance Initiative. (2018). Extending Our Horizons - Assessing credit risk and opportunity in a
changing climate: Outputs of a working group of 16 banks piloting the TCFD Recommendations. Part I:
Transition-related risks and opportunities (pages 12–62). [CSA-3]
After completing this reading you should be able to:
• Explain how scenarios are used for assessing transition risk.
• Identify the three main methods of modelling transition risk.
• Describe the lessons learned from bank piloting using case studies and results.
• Evaluate how transition scenario analysis can be used to assess opportunity and segment
market attractiveness.

39. UNEP Finance Initiative. (2019). Changing Course: A comprehensive investor guide to scenario-based
methods for climate risk assessment, in response to the TCFD (pages 16–49). [CSA-4]
After completing this reading you should be able to:
• Assess the available methodologies for climate-related scenario analysis, including scenario design and
physical and transition risk assessment.
• Delineate the process for designing a scenario analysis for assessing climate risk.
• Describe the framework to calculate the Climate Value at Risk® (CVaR) metric for equities, bonds, and
real estate assets.

2020 SCR Certificate Study Guide and Learning Objectives garp.org/scr 19

Module 6: Current Issues in Sustainability
and Climate Risk
EXAM WEIGHT | 10% (CI)

TOPICS AND READINGS

This module highlights issues in sustainability and climate risk by sharing current and up-and-coming issues
that are increasingly becoming part of the sustainability and climate risk landscape. The knowledge points in
Current Issues in Sustainability and Climate Risk include the following:

• Health effects, disease, and vector migration

• Renewable energy finance
• Natural capital
• Sea-level rise: adaptation and sovereignty
• Economic impacts of Arctic change
• Geoengineering

To cover these broad knowledge points, a set of curated readings is listed on the following page along with
detailed learning objectives associated with these readings. A brief summary of how to relate these readings
to the knowledge points follows in the descriptions below.

Reading 40 introduces the concepts of health, disease, and vector migration to illustrate the social costs of
climate change in addition to the environmental and economic ramifications. The reading also reveals the
social science and natural science ramifications of climate change, an increasingly studied component of the
greater sustainability and climate risk landscape.

Reading 41 situates the financing of renewable energy in emerging economies and links these actions with the
UN Sustainable Development Goals (SDGs). In particular, the reading highlights the difficulties of financing
renewable energy in Africa while describing the differences in available financial mechanisms and incentives
available elsewhere.

Reading 42 explores the concept of natural capital and gives value to the environmental and ecosystem-
based resources that, typically, have neither been quantified nor considered in many past economic analyses.
These resources affect the impacts of greenhouse gases, pollution, waste, biodiversity, toxicity, and others.

Reading 43 exposes the spectrum of impacts faced by some communities — particularly island and delta-
based localities — inundated by rising sea levels. It explores the difficult decisions that inhabitants must make:
whether to remain and rebuild or leave for safer areas.

Reading 44 focuses on the knock-on effects of a changing Arctic climate and modifications within the diverse
Arctic geography. It explains how some of these changes can be seen as temporarily positive yet on the
whole act as a destabilizing force.

Lastly, Reading 45 gives a comprehensive overview of the different land-based, ocean-based, atmosphere-
based, and space-based approaches toward using geoengineering (i.e., the intentional large-scale
manipulation of the environment) to address climate change.

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The readings that you should focus on for this section and the specific learning objectives that should be achieved with
each reading are as follows:

40. Hayes, K. and Poland, B. (2018) Addressing Mental Health in a Changing Climate: Incorporating
Mental Health Indicators into Climate Change and Health Vulnerability and Adaptation Assessments.
International Journal of Environmental Research and Public Health. 15(9) (pages 1-15).
doi:10.3390/ijerph15091806 [CI-1]
After completing this reading you should be able to:
• Describe the connections between a changing climate and the increased risks of health effects on
humans.
• Identify health strategies to mitigate the effects of climate change on humans and the underlying
rationale for the development of these frameworks.
• Assess how health risks can be minimized and avoided via assessments.
• Analyze the mental health dynamics for various socioeconomic groups and the associated implications.

41. Schwerhoff, G., and Sy, M. (2017). Financing renewable energy in Africa – Key challenge of the
sustainable development goals. Renewable and Sustainable Energy Reviews. 75 (pages 393-401).
doi 10.1016/j.rser.2016.11.004 [CI-2]
After completing this reading you should be able to:
• Describe the relationship between renewable energy and the SDGs.
• Identify the financial challenges and opportunities related to investment in developing countries,
distinguishing between private and social costs.
• Assess the differences in funding between Development Finance Institutions (DFI) and climate-
based funds.
• Analyze the incentives for developed and developing countries to participate in clean energy
development.

42. Pritchard, R., and van der Horst, D. (2018). Monetary Natural Capital Assessment in the Private Sector:
A review of current status and research needs. Valuing Nature Programme (pages 1-12). [CI-3]
After completing this reading you should be able to:
• Define and describe natural capital and natural capital risk.
• Identify the value of natural capital assessment for different stakeholders.
• Describe the four main stages of natural capital assessment.
• Explain how impacts and dependencies form part of a natural capital assessment.
• Discuss how a natural capital assessment, once completed, is utilized by businesses.

43. Jamero, M.L., Onuki, M., Esteban, M., Billones-Sensano, X.K., Tan, N., Nellas, A., Takagi, H., Thao,
N., Valenzuela, V.P. (2017). Small-island communities in the Philippines prefer local measures to
relocation in response to sea-level rise. Nature Climate Change. 7(8). (pages 581-586).
doi: 10.1038/nclimate3344 [CI-4]
After completing this reading you should be able to:
• Explain the adaptation strategies used in addressing sea-level rise such as migration.
• Identify the environmental, health, and social impacts of storm surge and sea-level rise on
island populations.
• Assess the differing perspectives of an island’s ability to remain habitable amid current and forecasted
sea-level rise.

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44. Alvarez, J. Yumashev, D., and Whiteman, G. (2019). A framework for assessing the economic impacts of
Arctic change. Ambio. (pages 1-9). doi: 10.1007/s13280-019-01211-z [CI-5]
After completing this reading you should be able to:
• Describe the framework for assessing the economic impacts of Arctic change.
• Assess the economic impacts, opportunities, and risks associated with a warming Arctic Region.
• Discuss the economic knock-on effects within the Arctic (and the greater globe) due to the impacts of
climate change.

45. Zhang, Z., Moore, J.C., Huisingh, D., and Zhao, Y. (2015). Review of geoengineering approaches to
mitigating climate change. Journal of Cleaner Production, 103 (pages 898-907).
doi:10.1016/j.jclepro.2014.09.076 [CI-6]
After completing this reading you should be able to:
• Define and describe the different types of geoengineering.
• Discuss the implementation of various geoengineering methods along with their proposed costs
and benefits.
• Explain the function and applicability of the different land-based, ocean-based, atmosphere-based, and
space-based geoengineering typologies.
• Assess the commonalities and contrasts between land-based, ocean-based, atmosphere-based, and
space-based geoengineering efforts.
• Discuss geoengineering efforts within an economic, environmental, and social-based context.

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2020 SCR Advisory Committee
MEMBERS

Piyush Agrawal Charmian Love

Chief Operating Officer Entrepreneur in Residence
Citibank, N.A. Saïd Business School, Oxford University

Steven Bullock Michael Marano

Global Head of Research Director Energy Products
ESG Analytics and Client Delivery CME Group
Trucost
Julie Pullen
Benjamin Carr Director of Product
Capital Risk Director Jupiter Intelligence
Aviva
Corinne Raux
John Colas Founder and Chief Executive
Partner and Vice Chairman The Environmental and
Financial Services Americas Social Agency for Financiers
Oliver Wyman
Michael Sheren
Neha Coulon Senior Advisor
Head of EMEA Capital Strategies Bank of England
Sustainable Finance
JPMorgan Chase Jakob Thomä, Ph.D.
Managing Director
Sandro Diez-Amigo 2° Investing Initiative
Senior Evaluation Officer
MIGA Michael Wilkins
World Bank Group Managing Director
S&P Global Ratings
Novera Khan
Chief Risk Officer
Uniper

Robert Litterman, Ph.D.

Chairman
Risk Committee
Kepos Capital

2020 SCR Advisory Committee

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