Firm-level climate risk assessment: Recent progress and future research agenda

As climate change intensifies, firms face increasing exposure to multidimensional risks. This discussion presents a comprehensive review of firm-level climate risk assessment, categorizing risks into three key types: physical, transition, and perceived risks. Physical risks encompass both direct damage to facilities and indirect disruptions to supply chains from climate hazards, with a shift toward integrated frameworks that combine high-granularity exposure data and firm-level vulnerability models. Transition risks arise from shifts in policies, technologies, and markets driven by climate change, with growing attention on firms' management capabilities and green investment strategies. Perceived risks involve subjective evaluations by market participants, such as investors, consumers, and managers, with an increasing reliance on textual analysis of news, social media, and earnings calls. We recommend the development of a comprehensive assessment framework that captures the interactions among the three main risk types and other uncategorized risks, enabling firms and governments to formulate integrated management strategies. Advanced methodologies, including machine learning, network analysis, stress testing, and multi-criteria decision analysis, should be explored to enhance the accuracy of risk assessments, helping firms navigate risks and capitalize on opportunities in a rapidly changing environment.