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Physical Climate Risk Metrics
Evaluate the physical climate risks facing your portfolio companies. By 2050, physical climate change could reduce GDP by up to 25% in some regions.1 The effects of climate change are being widely felt, and both transition and physical risks are increasingly more material across sectors and regions. Morningstar Sustainalytics’ Physical Climate Risk Metrics help investors understand their direct and indirect exposure to physical climate change, and the potential financial impacts to their portfolio companies. With coverage on over 12 million assets, investors can leverage Physical Climate Risk Metrics to manage their portfolio exposure, fulfill reporting requirements, and prioritize topics and companies for engagement activities.
Physical climate risks are the damages and losses to property that occur due to the physical consequences of climate change. These physical risks result from acute climatic events, such as flooding, wildfires and extreme heat, and chronic climatic events like droughts and coastal inundation.
Physical climate risks are unevenly distributed across countries and regions, and over time, so locations that are at low risk today may have much higher risk in the future. Across the business value chain, physical climate risks can have direct impacts, like impairment costs and productivity loss, and indirect impacts that can disrupt supply and demand. All of these can have an impact to the investor, such as a change in earnings or an increase in default risk.
Disclose company-level physical climate risk data to voluntary and mandatory reporting bodies, as well as clients looking for climate change-aligned investment products.
Physical Climate Risk Metrics offer visibility into the financial impacts of physical climate risks, considering a company’s revenue, physical asset value, and operating cash flow.
Direct and indirect exposure metrics are calculated as separate signals, aligning with the Task Force for Climate-related Disclosures (TCFD) recommendations, and roll-up to a single overall exposure signal.
Easily compare a company’s exposure to physical climate hazards across different industries, geographies, short and long-term time horizons and climate change scenarios.
Sustainalytics collaborated with XDI, an award-winning global leader in physical climate risk analysis on companies and their assets, to create these metrics.
Investors can assess their exposure to physical climate risks by analyzing a company’s projected financial losses and financial capacity to absorb losses, based on a company’s owned or leased global assets.
Comprehensive Issuer & Asset Coverage
Physical Climate Risk Metrics offer a bottom-up assessment of physical climate risks, covering 12 million assets, 135 sectors and 235 countries.
Unparalleled Data
The rich data underpinning our exposure assessment spans multiple lenses, including hazards, countries, loss amounts, time series, climate scenarios and the quality of company asset-level data.
Assessment of Expected Financial Losses
Multiple financial metrics and data points provide investors with direct inputs for Value-at-Risk modelling based on direct and indirect physical climate risks.
Multiple Report Views
Company profiles in Global Access include interactive graphs, web-based reports and data visualizations to help investors visualize the extent of their exposure to physical climate change. Plus, five standard reports are delivered through Sustainalytics’ Data Services or API.
Geographic & Hazard Coverage
The metrics incorporate global modelling of the future probability and severity of 8 hazards: coastal inundation, extreme heat, extreme wind, flooding, forest fire, freeze-thaw, soil subsidence, and cyclone wind.