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.
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.
These clusters of risk and resilience indicators are then fed into a pipeline that aggregates them into two quantitative coefficients: Physical Impact Coefficient and Resilience Adjusted Impact Coefficient.
Note: Physical Impact projects the net financial impact of physical climate risks on a given location at a given time in the future and under a given climate change scenario and is expressed as a percent change from a location’s projected market growth rate.
A location’s Relative Resilience-Adjusted Risk Profile modifies the Relative Risk Impact Profile and is used to calculate the Resilience-Adjusted Impact Coefficient. This paints a more holistic picture of how climate change impacts assets in locations by considering the ability of a location to offset physical risks.
Quick Tip: Check out this article on the Risk Indicators depicted above!
The Relative Resilience-Adjusted Risk Profile is calculated by subtracting the Total Physical Risk Indicator from the Total Resilience Adjusted Indicator. The resultant Total Resilience-Adjusted Risk Indicator represents the new overall risk profile of a location considering its resilience characteristics. Then, we calculate the Z-score of each location to obtain its Relative Resilience-Adjusted Risk Profile for impact coefficient calculation. To calculate the coefficient, we multiply the Relative Resilience-Adjusted Risk Profile by its Climate Sensitivity:
For example, if the same location boasts robust resilience traits to offset physical climate risks, its Relative Resilience-Adjusted Risk Profile could now have a Z-score of 0.5 with the same Climate Sensitivity of 2.4% loss (-2.4%) in the year 2050. The new, Resilience-Adjusted Impact Coefficient for this location in the year 2050 will be (-2.4) * 0.5 = -1.2%, resulting in a projected 2050 valuation of $9.88M. The cumulative damage of $0.12M estimate is much lower than its Physical Impact Coefficient.