The impacts of climate change-driven extreme weather have become a growing concern for businesses, investors and regulators worldwide, with regulators already requiring or planning to require companies to report on climate-related risks.
As an answer to this call, Bloomberg and Riskthinking.AI have joined forces to bring us a groundbreaking new tool that promises to redefine the way businesses and investors understand their exposure to climate-related risks.
World’s first physical climate risk indicators
On October 26, the two companies launched the world’s first physical climate risk indicators that offer a “new and powerful way to assess […] exposure to floods, droughts, wildfires, and other climate vulnerabilities.”
“Our pioneering methodology enables investors to use the uncertainty inherent in climate modeling as a strength to support better investment decisions,” CEO and Founder of Riskthinking.AI Dr. Ron Dembo said.
The new indicators, according to the two companies, account for every climate scenario endorsed by the Intergovernmental Panel on Climate Change (IPCC) and are the first to consider several possible future outcomes.
“The indicators intuitively express the physical risk exposure level for a company on a scale of 0 to 100 with high, moderate, and low classifications, and forward-looking projections up to the year 2050,” Bloomberg explains.
How is the climate risk exposure calculated?
The tool calculates companies’ physical risk exposure level by combining Bloomberg’s data on over a million physical assets across almost 50,000 companies, like energy plants, manufacturing sites, mining operations, office buildings, and retail sites, with Riskthinking.AI’s “highly granular dataset of global climate change projections and proprietary methodology.”
As the two companies explain in a press release announcing the launch, “Riskthinking.AI applies a bottom-up methodology analyzing the climate conditions at each asset location, which enables users to drill down to the individual assets of a parent company so specific threats can be analyzed.”
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“Achieving reliable assessment of exposure to physical hazards relies on large amounts of geospatial and climate data to effectively account for the uncertainty inherent in future projections,” Bloomberg’s Global Head of Sustainable Finance Solutions Patricia Torres said.
“By bringing together cutting-edge climate science with investor grade physical assets data, we can help investors and companies to better navigate the increasingly complex financial and regulatory environment regarding physical risk,” Torres added.
The two companies underline that the new indicators are aligned with various reporting regimes, including the Corporate Sustainability Reporting Directive (CSRD) in Europe, the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations, and the IFRS Sustainability Disclosure Standards in some key jurisdictions.
As such, users can use data provided by the indicators to report on their climate-related risks in line with the above regimes.
The physical risk indicators are now accessible on the Bloomberg Terminal and via Bloomberg Data License at data.Bloomberg.com for enterprise use. For more information about the Physical Risk Indicators, click here.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — In the Featured Photo: Flooding in Cedar Rapids, IA. Featured Photo Credit: U.S. Geological Survey.