Climate change has moved from being a peripheral concern to a central issue in the global economic and financial landscape. The increasing awareness of its wide-ranging impacts has made it clear that the effects of climate change are not limited to environmental shifts—they directly influence the financial markets, business strategies, and investment decisions. As climate-related events such as severe storms, floods, and droughts become more frequent and intense, financial institutions, companies, and governments must adapt their strategies to address these risks.

This book aims to explore the ways in which climate risk—both physical and transition risk—can influence the valuation of assets, the financial stability of businesses, and investment strategies. Understanding climate risk is essential for accurate valuation in an era where the traditional metrics used to assess value no longer account for the long-term consequences of climate change.

We will examine various methods and tools to assess and integrate climate risks into financial modeling, offering insights into how investors, corporate managers, and policymakers can navigate the complex intersection of environmental change and financial stability. As we will see, addressing climate risk is not just about mitigating losses—it is also about seizing opportunities that emerge in the transition to a low-carbon economy.