S&P adds financial impact to physical climate risk database

The move follows its acquisition of physical risk data provider The Climate Service.

Users will be able to assess how company and asset-level valuations could be impacted by climate change hazards via S&P Global’s updated physical risk database.

The new climate risk solution provides actionable data for investors looking to benchmark portfolio companies and drive stewardship efforts. Physical climate risks are notoriously hard to model due to the vast amounts of data involved and the dynamic nature of future weather events.

The database combines S&P’s extensive asset-level data with predictions on a range of future climate hazards to project associated financial costs, expressed as a percentage of an exposed asset’s value.

Users can also drill down into the intensity of asset-level physical risk, which is scored on a scale of 100 relative to global conditions.

It contains information on more than 20,000 companies and 870,000 assets globally, bringing together S&P data and climate analytics from recent acquisition The Climate Service, a provider of physical risk data.

The database uses the latest climate change scenarios to underpin the work of the Intergovernmental Panel on Climate Change (IPCC) and covers exposures to extreme heat, extreme cold, wildfire, water stress, drought, coastal flood, fluvial flood and tropical cyclone.

According to S&P, the dataset reveals that 92 percent of the world’s largest companies will have at least one asset that is highly exposed to physical climate risk by 2050, even under a scenario where the rise in global temperatures is kept below 2C.

“Our role is to make climate data decision-useful for investors. Using global averages to measure physical risk is somewhat meaningless until you get down to asset-level impact,” said Steve Bullock, S&P Global Sustainable1’s global head of ESG innovation.

“While climate models are complex, uncertainty is no reason not to take action because we are already seeing climate change materialise in real time and we need more transparency on the climate risks faced by companies and investors.”