Cervest has launched a new methodology which provides clients with a portfolio to asset rating system which helps interpret and understand climate related risk on a globally comparable basis.
- New ratings methodology launched for asset level exposure to climate risk.
- Clarity on asset level climate risk should highlight vulnerabilities and impact investment decisions.
- Assessment of climate risk is moving towards standardisation but its unclear which approach will dominate.
As the use cases for climate intelligence grow, so does the demand for organizations to disclose their climate-related risk, and the need for a scalable, comparable and easily understandable ratings system.
Partha Bose, Head of Capital Markets at Cervest said: “Climate risk is a complex and multivariate problem with many interdependencies. Customers need transparent, easily explainable ratings to quickly prioritize assets across their portfolio.”
What the new ratings provide
Cervest Ratings can be used to evaluate the potential for climate-related risks to cause physical damage and disruption to any combination of assets, from individual assets to portfolios, companies and financial securities.
According to a Cervest spokesperson, the new ratings system makes it easier than ever for organisations, financial institutions and governments to interpret and understand their climate-related risks.
In the face of growing complexity, it is increasingly important that investors have access to a standardised view of climate risk. This supports clients in reporting risk to different stakeholders, strengthens both pre-acquisition due diligence and investment strategies, and should inform adaptation planning on their most vulnerable assets.
Understanding climate risk ratings
The ratings themselves are assessed using Cervest’s existing cloud-based climate intelligence programmes, which combine earth sciences and machine learning techniques. Such an approach enables Cervest Ratings to map climate-related risk on millions of around the world.
The ratings system is available for 500 million discoverable global assets, or any asset defined by the customer and includes an A-F rating of assets. For example, Cervest Rating A is considered ‘Very Low climate-related risk’, and F ’Extremely High climate-related risk’.
With Cervest Ratings, customers can screen, compare and prioritise their assets for climate-related risk across multiple climate scenarios, time horizons and hazards simultaneously, and identify the key physical risk metrics driving their rating so that they can make more informed decisions about their adaptation planning.
Cervest Ratings are available at five-year time intervals from 1970 – 2100 across multiple IPCC-aligned climate scenarios and across all existing risk categories: heat stress, flooding (riverine and coastal), drought, precipitation and extreme wind.