Climate risk assessment looks slightly different for railroad construction projects and for ESRS/CSRD and IFRS due diligence, even if the underlying climate data is exactly the same. Let’s discuss here the risk assessment for compliance. 

 

What exactly do companies need to disclose under ESRS/CSRD and IFRS for physical risks?

Answer: “share of portfolio at risk”. 

 

For example: “31% of assets are exposed to hazard A and 12% of assets are exposed to hazard B”.

 

Regarding the structure of the deliverables: physical climate risk assessments can be provided in the following formats:

Digital Data Access via API in JSON format or as an Excel file through the analytical interactive platform, and also,

Comprehensive Analytical Report (PDF) with a clear human-readable executive summary featuring graphs, tables, detailed flood maps, and expert interpretations, focusing on the most important insights and critical hazards.

 

A quick example. Figure 2 answers three important questions:

 

🔹 Where is the problem? Which factories & warehouses are the most exposed to climate risks?

🔹 What’s the type of hazard there: flood, drought, or wildfire?

🔹 Where is urgent action needed? 

 

Figure 2. Example of “phase 1” : physical risk assessment for a group of 30 facilities (X-axis) for a company. Y-axis: hazards. Color: risk scores. Historical knowledge.

 

Figure 2 tells us: if we take all historical data (1950 - present) plus several climate models, we already know the exposure for each location. We can tell which sites in our portfolio are most “at risk”? Red (extreme risk) also means “uninsurable”: no short-term financial hedging is feasible. Orange (severe risk score) means short-term financial hedging is limited and expensive. Green (low risk) means you don’t need hedging or insurance for this hazard at this location: there’s nothing exceptional to mitigate and anticipate.

 

As you can see, the risk scores are comparable across locations (geographies), between hazard types, between time periods (past vs. future), and between scenarios. This comparability is incredibly handy and useful.

 

If you’re an investor taking a position beyond the 3-day weather-forecast horizon, considering these climate-related financial indices will save your time and money. For example, whether you’re building a new factory, designing a railway, estimating expected loss for each facility, or negotiating insurance policies, you can rely on these data to guide your investment decisions, strategies and priorities.

 

This big picture, with the historical asset-level risk scores (Figure 2), serves as the baseline, the reference and “ground truth” for the forward-looking scenario analysis.

 

In the next step of the analysis, included in our analytical reports, we answer:

 

• Which of these facilities are subject to potential direct physical damage?

• Which facilities are not subject to physical damage but face material climate risks that could lead to major business interruptions, shutdowns and delays?

• Are business interruptions and shutdowns predictable? Of the same magnitude every year?

• Do patterns (e.g. number of hot days) remain stable across different years: e.g., ~10-15 days per year?

• If we look at the volatility: are there significant anomalies or surprises over 10-, 20-, 30-year intervals? When using high-quality climate data: what is the expected loss over the building’s life cycle?

• Are there any trends when we compare the past with the forward-looking results? For which facilities? For which hazards?

 

To answer these questions, we apply a bottom-up approach. This means we take the risk scores for each location, compare this asset-level data, and then aggregate it further at the portfolio and company levels.