Within theEnvironmental Factorschapter, the OTM discusses climate risk in project valuation, highlighting physical risk impacts:

“Rising temperatures, flooding, and heat stress can increaseoperating expensesfor infrastructure assets due to higher cooling requirements, maintenance costs, and efficiency losses.”

For instance, energy facilities may require enhanced insulation, cooling systems, or backup capacity—all directly impacting operating expenditure (OPEX). Revenues might also fluctuate, but theprimary and quantifiable effectlies in cost escalation rather than revenue reduction.

Therefore, the correct analytical adjustment in discounted cash flow (DCF) models would be to increaseoperating expenses, makingoption Ccorrect.

????Reference:2021-Final-Book.pdf, Chapter 3 — Environmental Factors (Physical Climate Risks and Financial Implications section).