The First Climate Ratings Firm to Estimate Financial Losses for Infrastructure Assets

A groundbreaking climate ratings firm established at French business university EDHEC has made strides in estimating projected financial losses for thousands of infrastructure assets across various climate change scenarios. This innovative approach marks a significant step forward in understanding the potential economic impacts of climate change, especially amidst recent rollbacks in environmental policies and climate change targets in certain countries.

Addressing Climate Risks with Data-Driven Insights

Scientific Climate Ratings, founded by CEO Rémy Estran-Fraioli, is majority-owned by EDHEC and is set to become an independent entity later this year. The firm’s initial focus will be on assessing approximately 6,000 assets, with plans to expand its coverage to over 5,000 listed equities in early 2026. Unlike traditional assessments that often overlook the financial implications of climate risks, Scientific Climate Ratings aims to provide granular data to enhance financial risk assessment and decision-making for investors and companies.

By utilizing a comprehensive global dataset developed by EDHEC, the ratings will offer insights into an asset’s exposure to climate risks under current government policies. The methodology includes two key ratings: a Potential Climate Exposure Ratings assessment and an Effective Climate Risk Ratings analysis. These assessments project potential financial impacts under various climate scenarios from 2035 to 2050, helping stakeholders understand the risks associated with their investments.

Key Findings and Implications

According to Estran-Fraioli, out of the assets assessed, over 1,000 are projected to experience significant losses by 2035 and 2050 if no action is taken. Notably, assets with the highest ratings (A or B) represent only a small fraction of the expected losses, while those with lower ratings (F and G) account for a substantial portion of the projected losses. This highlights the importance of proactive risk management and investment strategies to mitigate climate-related financial risks.

As trillions of dollars are invested in infrastructure assets vulnerable to extreme weather events, understanding and addressing climate risks is paramount for sustainable investment practices. Scientific Climate Ratings’ data-driven approach provides a valuable tool for stakeholders to assess and manage these risks effectively.

In conclusion, the pioneering work of Scientific Climate Ratings in estimating financial losses for infrastructure assets under climate change scenarios underscores the urgent need for integrated risk management strategies in the face of accelerating climate risks.

(Source: Reuters)