The Global Association of Risk Professionals (GARP) Sustainability and Climate Risk (SCR) Certificate is a leading credential for professionals in climate risk management, sustainable finance, and regulatory compliance. As the world shifts toward net-zero commitments, understanding climate-related financial risks is no longer optional—it’s a necessity.
The 2025 SCR exam requires a strong grasp of climate science, regulatory frameworks, financial risk management, and sustainability strategies. This article outlines the critical knowledge areas from the official learning objectives and fact sheet, ensuring that candidates are fully prepared before sitting for the exam.
Chapter 1: Foundations of Climate Change
Key Concepts and Definitions
Climate Change: Long-term alterations in the statistical properties of the climate system over multi-decadal periods. It includes shifts in temperature, precipitation, and sea levels, primarily driven by human activities such as fossil fuel combustion.
Weather vs. Climate:
Weather: Short-term atmospheric conditions at a specific place and time.
Climate: Long-term average of weather patterns over 30+ years.
Evidence of Modern Climate Change:
Surface Temperature Rise: ~1.2°C increase since the late 19th century.
Sea Ice Decline: Arctic sea ice is shrinking, reducing Earth’s albedo and amplifying warming.
Glacier Mass Loss: Increasing melt contributes to rising sea levels.
Ocean Heat Content: Oceans absorb over 90% of excess heat, expanding seawater and raising sea levels.
Greenhouse Gases and Their Impact
Carbon Dioxide (CO₂): Main contributor (~56% of total radiative forcing), with a lifetime of 500+ years.
Methane (CH₄): More potent than CO₂ (GWP: 29), with a shorter lifetime (~11.8 years).
Nitrous Oxide (N₂O): Contributes ~5% to greenhouse effect (GWP: 273, lifetime: 109 years).
Halocarbons and Ozone (O₃): Have high warming potential and are linked to industrial emissions.
Earth’s Energy Balance & Radiative Forcing
Greenhouse Effect: Certain gases trap heat, keeping Earth’s climate stable.
Positive Radiative Forcing: Results in warming (e.g., GHGs increase heat retention).
Negative Radiative Forcing: Results in cooling (e.g., aerosols reflect solar radiation).
Human vs. Non-Human Climate Drivers
Natural: Solar variability, volcanic activity, Earth’s orbital changes.
Human: Industrial emissions, deforestation, agriculture, urbanization.
Chapter 2: Sustainability and ESG
Sustainability and Its Three Dimensions
Environmental Sustainability: Protecting ecosystems and biodiversity, reducing carbon footprints.
Social Sustainability: Addressing human rights, labor conditions, and social justice.
Economic Sustainability: Ensuring long-term economic growth without depleting natural resources.
ESG (Environmental, Social, Governance) Framework
Environmental: Energy use, emissions, waste management.
Social: Workforce diversity, labor standards, community engagement.
Governance: Transparency, board diversity, corporate ethics.
Sustainability Reporting Standards
Global Reporting Initiative (GRI): Comprehensive sustainability reporting framework.
Task Force on Climate-Related Financial Disclosures (TCFD): Climate risk disclosure framework.
Sustainability Accounting Standards Board (SASB): Industry-specific ESG standards.
Greenwashing and Greenwishing
Greenwashing: Misleading claims about sustainability efforts.
Greenwishing: Aspirational sustainability goals without proper implementation.
Counteracting Actions: Regulatory enforcement, third-party verification, consumer awareness.
Life-Cycle Assessment (LCA)
Analyzes environmental impacts across a product's life cycle.
Supports decision-making for sustainable product design.
Chapter 3: Climate Change Risk
Types of Climate Risk
Physical Risks:
Acute: Short-term extreme weather events (hurricanes, floods, wildfires).
Chronic: Long-term climate shifts (rising sea levels, prolonged droughts).
Transition Risks:
Regulatory Risks: Carbon taxes, stricter emission controls.
Market Risks: Shifts in consumer demand, stranded assets.
Technology Risks: Disruptive innovations replacing fossil fuels.
Reputational Risks: Negative perception of high-emission companies.
Stranded Assets
Assets that lose value due to climate-related market changes (e.g., fossil fuel reserves, high-emission factories).
Sectors impacted: Energy (coal, oil), Real Estate (coastal properties), Automotive (internal combustion vehicles).
Hazard, Exposure, Vulnerability Interactions
Hazard: Climate-related event (floods, heatwaves).
Exposure: Location and economic dependence on at-risk sectors.
Vulnerability: The ability to cope with climate impacts.
Opportunities in Climate Risk Management
Resilient Infrastructure: Adaptive building designs, flood defenses.
Sustainable Investments: Green finance, ESG-integrated portfolios.
Technology Innovation: Renewable energy, electrification, efficiency improvements.
Chapter 4: Sustainability and Climate Policy
Evolution of International Climate Policy
Paris Agreement (2015): Aims to limit global warming to below 2°C.
Kyoto Protocol (1997): Established binding emission targets for developed nations.
EU Green Deal: A roadmap to carbon neutrality by 2050.
Carbon Pricing Mechanisms
Carbon Tax: Direct tax on emissions.
Cap-and-Trade: Market-based system where firms trade emission allowances.
Scope 1, 2, 3 Emissions
Scope 1: Direct emissions (company-owned facilities).
Scope 2: Indirect emissions (energy purchased).
Scope 3: Upstream/downstream value chain emissions (most complex to measure).
Role of Central Banks
Integrating climate risk into financial supervision and monetary policy.
Supporting green finance initiatives and investment frameworks.
Chapter 5: Green and Sustainable Finance
Sustainable Finance Overview
Green Finance: Investments aimed at environmental benefits.
Climate Finance: Funding projects mitigating climate impacts.
Sustainable Investing: Integrating ESG into portfolio management.
Financial Instruments
Green Bonds: Debt financing for eco-friendly projects.
Social Bonds: Funds for climate adaptation in vulnerable communities.
Sustainability-Linked Bonds: Financial incentives tied to ESG performance.
ESG Integration in Investing
Exclusionary Screening: Avoiding high-carbon industries.
Impact Investing: Direct funding for sustainable projects.
ESG Engagement: Encouraging companies to improve sustainability practices.
Regulatory Trends in Sustainable Finance
EU Taxonomy for Sustainable Activities: Defines what qualifies as a green investment.
SEC Climate Disclosure Rules: Mandatory corporate climate risk reporting in the U.S.
Chapter 6: Climate Risk Measurement and Management
Climate Risk as a Financial and Systemic Risk
Microeconomic Effects: Climate risk affects operational, credit, liquidity, and underwriting risks at the company level.
Macroeconomic Effects: Climate risks influence sovereign debt stability, GDP growth, and inflation.
Systemic Risk: Climate change can disrupt financial markets and increase systemic vulnerabilities.
Measuring Physical and Transition Risks
Physical Risk Measurement: Uses climate modeling, geospatial data, and asset-level risk assessments.
Transition Risk Measurement: Evaluates policy changes, market shifts, and carbon pricing impacts.
Portfolio-Level Risk Assessment: Examines the exposure of investments to physical and transition risks.
Enterprise Risk Management (ERM) and Climate Risk
Integrating Climate Risk into ERM: Companies must align climate risk strategies with existing governance, strategy, risk assessment, and disclosure frameworks.
Key Risk Metrics: Climate Value-at-Risk (CVaR), Weighted Average Carbon Intensity (WACI), and total carbon footprint.
Chapter 7: Climate Models and Scenario Analysis
Understanding Climate Scenario Analysis
Definition: Scenario analysis is used to model future climate pathways and assess potential risks.
Types of Climate Scenarios:
IPCC Representative Concentration Pathways (RCPs): Used to project climate change based on different emission levels.
Shared Socioeconomic Pathways (SSPs): Combines economic, technological, and policy drivers to predict climate futures.
IEA Net Zero Scenario: Analyzes pathways to net-zero emissions.
Application of Scenario Analysis in Risk Management
Physical Risk Assessment: Uses climate projections to assess potential damage to infrastructure and business operations.
Transition Risk Assessment: Evaluates how policy shifts, market trends, and technology adoption impact financial assets.
Use in Financial Institutions: Helps banks and asset managers align investment strategies with climate-related risks.
Chapter 8: Net Zero and Decarbonization
Understanding Net Zero Commitments
Net Zero Definition: Achieving a balance between emissions produced and removed from the atmosphere.
Science-Based Net Zero Targets: Aligns with the Paris Agreement's goal of limiting warming to 1.5°C.
Key Components of Net Zero Strategies
Interim Targets: Short-term goals to track progress towards net zero.
Carbon Offsetting vs. Absolute Reduction:
Carbon Offsets: Investing in reforestation or carbon removal projects to compensate for emissions.
Absolute Reduction: Reducing emissions at the source through energy efficiency and clean technology.
Challenges in Achieving Net Zero:
Greenwashing risks: Ensuring that net-zero claims are backed by credible action plans.
Sector-Specific Barriers: Some industries, such as aviation and heavy industry, face technological limitations in reducing emissions.
Net Zero Disclosure and Accountability
Net-Zero Transition Plans: Companies must publish transparent transition strategies.
Portfolio Alignment Metrics: Investors use temperature alignment scores to assess portfolio consistency with net-zero goals.
Chapter 9: Climate and Nature Risk Assessment
Nature-Related Financial Risks
Biodiversity Risk: Loss of biodiversity affects agriculture, fisheries, and water security.
Taskforce on Nature-Related Financial Disclosures (TNFD): Provides a framework for measuring nature-related risks in financial markets.
Assessing Physical and Transition Risks for Nature
Physical Risks: Climate change leads to land degradation, desertification, and ecosystem collapse.
Transition Risks: Policy shifts aimed at protecting biodiversity can affect business models reliant on natural resources.
Ecosystem Services and Financial Markets
Ecosystem Services: Includes carbon sequestration, pollination, and water purification.
Financial Impact: Businesses reliant on ecosystems face operational disruptions and increased costs.
Chapter 10: Transition Planning and Carbon Reporting
Carbon Accounting and Reporting Frameworks
GHG Protocol: Standard framework for measuring Scope 1, 2, and 3 emissions.
IFRS Sustainability Reporting Standards: Defines requirements for climate-related financial disclosures.
EU Taxonomy and SEC Climate Rules: Emerging regulatory frameworks for mandatory carbon reporting.
Scope 1, 2, 3 Emissions
Scope 1: Direct emissions from company-owned operations.
Scope 2: Indirect emissions from purchased electricity.
Scope 3: Indirect emissions from supply chain, product use, and logistics.
Challenges in Carbon Reporting
Data Availability: Companies struggle with incomplete emissions data.
Regulatory Fragmentation: Different countries impose varying disclosure requirements.
Greenwashing Risks: Some firms inflate sustainability claims without measurable impact.
Importance of Transition Planning
Aligning Business Strategy with Climate Goals: Companies integrate low-carbon technology and renewable energy into operations.
Setting Science-Based Targets: Organizations commit to emissions reductions based on climate science.
How to Pass the GARP SCR 2025 Exam
✅ Master Core Topics: Climate science, financial risk, ESG frameworks, mitigation strategies, carbon markets, and regulations.
✅ Apply Real-World Examples: The exam favors scenario-based applications over rote memorization.
✅ Understand Financial Implications: Climate change is a financial risk, not just an environmental issue. ✅ Stay Updated on Policies: Regulations evolve, so continuous learning is crucial.
✅ Practice with Case Studies: Analyze corporate sustainability reports and risk disclosures.
By mastering these critical knowledge areas, you’ll not only pass the GARP SCR 2025 exam but also position yourself as a leader in climate risk management and sustainable finance.
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