Physical Impact projects the net financial impact of climate risks on a location at a given time in the future and under a given climate change scenario, expressed as a percent change from a location’s projected market growth rate.
We begin by gathering raw, unstructured climate, socio-economic, and market data from an array of public and private sources. This data is meticulously engineered and refined into curated features that offer distilled insights into the impact of climate change.
Sets of related features are then consolidated into thematic indicators for calculation and analysis. These thematic indicators are bucketed into two main categories: Risk and Resilience. Risk Indicators assess the potential damage from physical climate hazards for any global coordinate based on historical data and future projections under multiple climate change scenarios (SSP2-4.5, SSP3-7.0, SSP5-8.5). Resilience Indicators assess a location’s readiness to absorb shocks as measured through a holistic range of attributes that are historically correlated to market performance.
Note: Resilience-Adjusted Impact modifies the Physical Impact coefficient with the location’s resilience profile in order to account for its capacity to offset physical climate risks. (It is also represented as a percent change from that location’s projected growth rate.)
The figure below illustrates the process by which we form a location’s Relative Physical Risk Profile, which measures the deviation of a location’s physical risk from the national mean and is used to calculate the Physical Impact Coefficient.
Quick Tip: Check out this article on Physical Risk Indicators depicted above!
The final Physical Impact Coefficient is then determined by multiplying a locations Relative Physical Risk Profile by its Climate Sensitivity:
For example, if the Relative Physical Risk Profile of a location has a Z-score of 2.5 with an estimated Climate Sensitivity of 2.4% loss (-2.4%) in the year 2050, the Physical Impact Coefficient for this location in the year 2050 will be (-2.4) * 2.5 = -6%. If the estimated value of a property is forecasted to be $10M in 2050, a Physical Impact Coefficient of -6% yields a risk-adjusted value of $9.4M.