​​​​​Physical climate risk assessment for a company or a group of locations: what does it look like?

 

Say you have a group of physical assets, a real estate portfolio, or a group of manufacturing facilities. For each location we take all climate data for all hazards and aggregate this asset-level data into "share of portfolio at risk" metric. 

 

The short (“starter”) version of the report is essentially a high-level executive summary.

It does not cover all hazards, only two. When comparing across hazard types, these two stand out for their intensity (volatility).

The high-level executive summary report does not discuss individual assets; instead, it reflects portfolio-level percentages. For example, if the primary two hazards are Flood and Heat Wave, then we would say: 

 

- A% exposed to direct flood damage,

- B% exposed to major flood risk without physical damage,

- C% exposed to extreme Heat Wave risk.

- D% and E% of the portfolio are projected to be exposed to extreme Flood and extreme Heat Wave risk by 2030/40/50 according to 3 scenarios.

- F% and H% of the portfolio are not exposed to these two hazards at all: as of today and in the future.

 

The short (“starter”) version of the report answers these questions:

 

- What are the main two hazards for this group of locations (portfolio)?

- How is exposure to these two primary hazards expected to evolve over time? Is there any tendency across the entire portfolio? How are the risk scores for these hazards projected to change in the future?

- What does the analysis look like for different climate scenarios across 3 future time horizons (2030, 2040, 2050)?

 

We clearly answer this important question:

For those locations with non-zero flood risk, is there a possibility of direct physical damage?

 

Figure 5. Example of “share of portfolio at risk”, showing the main hazards for the company, with the historical split (left) and the future split (right).

 

 

Summary table: scenario analysis for “share of portfolio at risk”, example. HIST means "present day" reference: it is calculated based on all available historical data. RCPxx reflect scenarios. 

 

 

 

Summary table: share of portfolio: (a) at risk of direct flood damage; (b) adjacent to flood-prone areas (“next door”); (c) in close proximity to flood-prone areas: at risk of major business interruptions.

 

The extended version of Portfolio Scan report includes the additional information, it also tells:

 

- Which facilities are exposed to what? 

- Which facilities are the most exposed to these two hazards?

- How is exposure to these two primary hazards expected to evolve over time? Is there any tendency across the entire portfolio? How are the risk scores for these hazards projected to change in the future?

- What does the analysis look like for different climate scenarios across 3 future time horizons?

- For those locations with non-zero flood risk scores, is there a possibility of direct physical damage to these facilities due to floodings?