Part of a new industry series: Inhabiting the Future™: Climate Risk Intelligence™ for Cities & Urban Infrastructure
Understanding Climate Risks: Transition and Systemic Risks
In addition to physical climate risks, cities must also contend with transition and systemic risks—less visible but equally critical dimensions of climate-related disruption. Transition risks stem from the economic, regulatory, and societal shifts necessary to transition toward a low-carbon and climate-resilient future. As governments introduce carbon pricing, phase out fossil fuels, and enforce new building efficiency standards, cities—and the businesses and infrastructure within them—face the challenge of adapting to rapidly evolving policy and market conditions. Urban assets that are carbon-intensive or dependent on outdated energy systems may become “stranded,” losing their value or functionality. Similarly, workforce transitions—such as job losses in carbon-heavy sectors and the need for reskilling—can create social and economic strain if not managed equitably.
Systemic risks refer to cascading impacts across interdependent urban systems, where disruption in one domain—such as energy, water, transportation, or finance—can trigger failures elsewhere. For example, a prolonged power outage during a heatwave can disable cooling systems, compromise healthcare facilities, and disrupt digital communication networks. These risks are magnified by the interconnectedness and complexity of modern cities, where tightly coupled infrastructure can amplify vulnerability. Climate-induced disruptions can ripple through supply chains, destabilize housing and insurance markets, and erode public trust in institutions, leading to broader societal instability.
What makes transition and systemic risks particularly challenging is their non-linear and often delayed nature. They are difficult to predict, yet their consequences can be widespread and deeply entrenched. Addressing them requires more than technical solutions; it demands governance models that prioritize cross-sectoral coordination, scenario planning, and equity. Climate risk intelligence must evolve to capture these multidimensional threats, equipping urban leaders to navigate the uncertainty of transformation while building cities that are not only resilient to shocks but also agile in the face of change. As the world shifts toward a decarbonized future, the cities that succeed will be those that treat transition and systemic risk as core design principles, not afterthoughts.
Ready to get started? To learn how ClimaTwin can help you assess the physical and financial impacts of future weather and climate extremes on your infrastructure assets, capital programs, and investment portfolio, please visit www.climatwin.com today.
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