Which of the following constitutes physical risks in climate scenarios?

Physical risks in climate scenarios refer to the direct impacts that climate change can have on the environment and human activity, manifesting through phenomena such as extreme weather events, rising sea levels, and changing environmental conditions.

Operational disruptions due to extreme weather effectively capture this concept, as they highlight the immediate effects climate change can have on businesses and infrastructure. For instance, extreme weather events like hurricanes, floods, or droughts can hinder operations by damaging facilities, disrupting supply chains, or leading to resource shortages. Such disruptions directly translate to economic losses and pose significant challenges for organizations that must adapt to and mitigate these risks.

On the other hand, regulatory penalties for emissions, investment losses from unsustainable practices, and shifts in consumer preferences address more indirect or transitional risks associated with climate change. These factors relate to how organizations must respond to regulatory frameworks, market trends, and societal expectations rather than the direct physical impacts on operations and infrastructure. Consequently, operational disruptions due to extreme weather events represent the essence of physical risks, making this the correct answer in the context of climate scenarios.