Climate risk is easiest to understand through examples. Below are concrete instances of physical and transition risk, grouped by hazard and by sector, with the business impact each creates and how a climate risk assessment turns it into a number.
Physical Risk Examples
Physical risk shows up as damage, downtime, and lost value from climate hazards. These are the most tangible examples:
- •Riverine or coastal flooding damages a manufacturing facility and halts production for weeks.
- •Wildfire destroys or devalues residential and commercial property in the wildland-urban interface.
- •Extreme heat reduces labour productivity, strains cooling systems, and derates data-centre capacity.
- •Drought cuts agricultural yields and disrupts water-dependent industrial processes.
- •Sea-level rise gradually erodes the value and insurability of coastal real estate.
Transition Risk Examples
Transition risk shows up as costs, write-downs, and lost demand as the economy decarbonises:
- •A carbon price or border adjustment (such as CBAM) raises the cost of high-emitting production.
- •A coal or oil asset becomes stranded as policy and demand shift away from fossil fuels.
- •A new efficiency standard makes an existing product line non-compliant or uncompetitive.
- •Reputational damage and divestment follow poor climate performance relative to peers.
Sector-Specific Examples
The same hazard lands differently across sectors, which is why asset-level, sector-aware assessment matters:
- •Real estate: flood and wildfire exposure directly affects property value, income, and insurability.
- •Banking: physical risk on collateral and transition risk on high-emitting borrowers feed credit losses.
- •Insurance: rising hazard frequency undermines models calibrated on historical loss experience.
- •Agriculture and food: drought, heat, and shifting seasons disrupt yields and supply chains.
- •Energy and heavy industry: carbon pricing and stranded-asset risk dominate the transition side.
From Example to Number
An example only becomes actionable when it is quantified. Floodlight maps each hazard to a probability distribution for the specific asset location, applies published damage curves, and returns Expected Annual Loss and percentile Climate Value-at-Risk. On the transition side, it models exposure to carbon costs and decarbonisation pathways. The result is a single financial figure per asset that a risk committee can compare against every other risk on the book.