MATHEMATICAL CONSIDERATION OF CLIMATE VaR THAT CONTRIBUTES TO THE CORRESPONDENCE TO TCFD, AND ASSESSMENT OF CLIMATE CHANGE RISK FOR FLOOD DAMAGE

Abstract

 TCFD (Task Force on Climate-related Financial Disclosures), in its final report in June 2017, recommended the understanding and disclosure of the impact of business and assets on future climate change. In response to this, Japan has become active in analyzing the risks of climate change using the Climate VaR proposed in the United States. Climate VaR can implement efficient risk management in response to TCFD recommendations. On the other hand, although there are various risks due to climate change, when examining recent natural disasters in Japan, it is necessary to evaluate Climate VaR in consideration of flood risk and utilize it for risk management. However, the details of Climate VaR are not always clear. Therefore, this paper examined the mathematical meaning of Climate VaR and its difference from other risk indicators used in risk finance. In addition, we show the way of thinking that the flood risk calculated from the engineering method is reflected in the evaluation of Climate VaR, and made a trial calculation with the idea that the way of thinking will materialize in the future.