Risk assessment evaluates how hazards may affect an entity or asset, combining ratings, evidence, and reasons while acknowledging unknowns and possible error. For nonfinancial risks, the scope can include pandemics, trade wars, and climate change. section 7.5.3 section 8.3.1
A practical assessment workflow can:
- Define the risk types and affected assets rather than asking only for a generic ESG evaluation. section 7.5.3
- Assign a transparent rating scale, such as 0 for minimum risk and 10 for maximum risk, and record a reason for each score. section 8.3.1
- Use algorithms and data sources for detailed analysis, or validate a high-level LLM evaluation when the decision does not require professional-grade precision. section 7.5.3 section 8.3.1
- Review the output skeptically: LLMs may hallucinate, while professional assessments are less vague and may be peer-reviewed. section 7.5.3 section 8.3.1
Portfolio risk prompt
Ask an LLM to rate pandemic, global trade-war, and climate-change exposure for each portfolio asset from 0 to 10, requiring at least one explanatory sentence or an admission of insufficient data. Compare the ratings and adjust attention or strategy when concentrated exposure appears. section 8.3.1
Table 8.2 A reference risk assessment provided by GPT-4o (0 minimum, 10 maximum)
|
Company
|
Pandemic
|
Reason
|
Trade war
|
Reason
|
Climate change
|
Reason
|
|---|---|---|---|---|---|---|
|
Google
|
2
|
Digital services thrive in pandemics.
|
6
|
Global ad spend is exposed to geopolitical frictions.
|
3
|
Low direct climate exposure
|
|
Pfizer
|
4
|
High initial benefit from COVID, less future upside
|
3
|
Limited export vulnerability
|
2
|
Low environmental risk overall
|
|
Ali Baba
|
5
|
Chinese consumption dropped in early pandemics.
|
9
|
Central figure in US-China tech decoupling
|
6
|
Some exposure to carbon-intensive logistics
|
|
Orsted
|
1
|
Renewable energy demand steady or rising
|
2
|
Localized wind/ green projects limit exposure.
|
9
|
Renewable energy play depends on climate policy.
|
|
CCJ
|
1
|
Uranium demand steady
|
4
|
Export-oriented but essential material
|
6
|
Positive exposure as nuclear gains from climate urgency
|
|
Lyft
|
8
|
Transportation demand falls in lockdowns.
|
3
|
Mainly domestic US service
|
4
|
Some regulatory risk for emissions
|
|
MNMD
|
3
|
Biotech trials delayed during pandemics.
|
1
|
Low global export relevance
|
2
|
No meaningful climate exposure
|
|
Uber
|
6
|
Rides fell and Eats rose in pandemic.
|
5
|
Operates globally, exposed to trade/friction
|
4
|
Transition risks from electrification targets
|
|
TSM
|
3
|
Demand dropped in the first wave but rebounded fast.
|
10
|
Key battleground in US-China chip conflict
|
5
|
Some energy/ water footprint issues
|
Use the table to compare asset-specific ratings and rationales across pandemics, trade wars, and climate change. section 8.3.1
