Large corporate assets at growing risk of climate impact

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© Reuters. Residents travel by boat through flood waters while heading towards their villages, following rains and floods during the monsoon season in Sehwan, Pakistan, September 13, 2022. REUTERS/Akhtar Soomro

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By Juliette Portala

(Reuters) – More than 90% of the world’s largest companies will have at least one asset highly exposed to the physical impacts of climate change by the 2050s, data and analysis from index and ratings provider S&P showed on Thursday. Global (NYSE:).

From heat waves to floods, extreme weather events are increasingly causing disruption across the globe, pushing companies and investors to seek to better understand and measure the risks to their assets.

If the world continues on the same path as today and fails to rein in climate-damaging emissions, 98% of the biggest companies – ranked like those in the S&P Global 1200 index – could be heavily exposed by now. the 2090s, he added.

However, if the Paris Climate Agreement target of limiting global warming to less than 2 degrees Celsius is achieved, the share of large companies with physical high-risk assets could be reduced to 39% over this period. .

“Investors and companies are looking for advanced analytics to address the financial impact of climate change. For this, it is essential to be able to quantify the financial impact of climate change at the asset level in order to enable meaningful planning of the mitigation and adaptation,” said James McMahon, Chief Executive Officer. The Climate Service officer, part of S&P Global, said in a statement.

Using climate models that simulate the physics, chemistry and biology of the atmosphere, land and oceans, S&P said it is able to assess the risk for more than 20,000 businesses and more than 870,000 locations of assets, rating each on a scale of zero to 100.

In the 2050s, every business would have at least one asset with a score above 75, which is considered to be at significantly high risk of extreme heat, extreme cold, wildfire, water stress, drought, coastal, fluvial and tropical flooding. cyclone.

After scoring an asset for physical risk exposure, S&P is then able to calculate the financial impact, allowing companies to tailor their exposure, he said.

“Simply put, this dataset allows companies and investors to understand their climate risks — and, importantly, what they could cost,” McMahon said.