An alliance of electricity power producers examines a proposed cap-and-trade regulation that would affect most members. The alliance lobbies lawmakers to strengthen banking and borrowing provisions in the proposed regulation, allowing increased flexibility for the sector to comply with emissions limits.
What component of climate risk is the alliance directly attempting to influence?
The alliance is attempting to influence its vulnerability. In the context of climate risk, vulnerability refers to the susceptibility of an entity to the adverse effects of climate change. By lobbying to strengthen banking and borrowing provisions, the alliance is seeking to increase its flexibility and resilience in complying with emissions limits, thereby reducing its vulnerability to potential regulatory impacts and financial penalties.
Vulnerability is linked to resilience, flexibility and adaptation. I reckon lobbying would reduce it's vulnerability to asset stranding
D: Drivers A lot of the climate risk DRIVERS that can lead to increased credit risk at an individual firm can affect entire sectors. In sectors such as utilities (for those still reliant on fossil power plants) or oil & gas, sector-wide asset stranding is expected to occur or has already occurred, which increases credit risk.
GARP SCR 2003 Question 42: A company will have little impact on drivers (e.g. policies); further, drivers are related to transition risk. (p. 52-53)