Reuters: EDHEC launches ratings to track climate hit on infrastructure assets

Reuters news agency has published an exclusive article introducing Scientific Climate Ratings (SCR), an EDHEC venture, highlighting its distinctive position as the first agency to estimate projected financial losses for thousands of infrastructure assets across multiple climate change scenarios.

The article authored by Simon Jessop, Editor of Sustainable Finance at Reuters, addressed the growing need to understand the potential costs of climate risks, as “political pressure leads to a rollback in environmental policies” in some countries, including the United States.

Key insights from the article include:

• Current assessments of potential impact of physical risks, such as wildfires or floods, on infrastructure remain “mostly high-level”. Addressing financial risk is important as “trillions of dollars are invested” in vulnerable infrastructure such as ports, airports and utilities.
• Leveraging a global dataset that tracks the assets in detail, SCR uses granular data to “help improve financial risk assessment and decision-making” for investors and companies.
• SCR’s methodology includes two ratings: The Potential Climate Exposure Ratings will look at the asset’s exposure to future climate risks under prevailing government policies. The Effective Climate Risk Ratings will then estimate the potential financial impact of a number of climate scenarios from 2035 to 2050, including the likely dollar impact expressed in terms of Net Asset Value (NAV).

Rémy Estran-Fraioli, CEO of Scientific Climate Ratings, told Reuters:

“We saw a critical disconnect. Climate risks are accelerating and at the same time, most financial decisions still overlook them or treat them as vague, non-financial concerns,

“Out of the 6,050 assets assessed, 1,088 are on track to experience losses of at least 24% by 2035 — and over 50% by 2050 if no action is taken,”

Read the full article.