Can a single rating truly capture the complex financial impact of climate risk across diverse scenarios, time horizons, and asset types?

At Scientific Climate Ratings (SCR), an EDHEC Venture, we firmly believe that the variability of climate impact across sectors, geographies, and assets requires a more robust and academically grounded approach.

Our objective is to move beyond mere exposure scores and deliver actionable financial insights for infrastructure companies worldwide.

To achieve this, Scientific Climate Ratings adopts an advanced dual approach, where two complementary ratings provide a holistic and comprehensive view of climate risk: The Potential Climate Exposure Rating (PCER) and The Effective Climate Risk Rating (ECRR).

These ratings offer an in-depth assessment to evaluate the financial materiality of both physical and transition risks up to 2050.

The Potential Climate Exposure Rating (PCER): Measures Future Exposure Under a “Continuity” Scenario

The Potential Climate Exposure Rating (PCER) measures future climate exposure under a “continuity” policy scenario, through 2035 and 2050. PCER ratings are presented on a scale from A (low exposure) to G (high exposure), allowing for clear peer comparison.

The Potential Climate Exposure Rating (PCER):

• Computes Scope 1, 2, and 3 emissions to measure transition risk exposure accurately.
• Uses precise geolocation and asset boundaries to evaluate physical risk exposure.
• Accounts for adaptation efforts and their effectiveness, leveraging the comprehensive ClimaTech database.
• Translates the final exposure into a score and a rating designed for peer comparison.

The Effective Climate Risk Rating (ECRR): Quantifies Expected Dollar Impact Across Multiple Scenarios

Complementing the PCER, the Effective Climate Risk Rating (ECRR) quantifies dollar impact expressed as Net Asset Value (NAV), by weighting a range of probabilities assigned to climate scenarios, including both physical and transition pathways, through 2035 & 2050.

The Effective Climate Risk Rating (ECRR):

• Calculates expected impact due to transition risk by analysing carbon costs and revenue growth.
• Computes expected impact due to physical risk through detailed geolocation and asset boundaries.
• Expressed as NAV impact, reflecting effects on cash flow and overall valuation.
• Accounts for adaptation efforts and their effectiveness by utilising the ClimaTech database.
• Translating the final exposure score into the ECRR for peer comparison.

Together, the PCER and ECRR provide a holistic and science-led assessment of the financial impact of climate risk. This dual approach ensures that investors and issuers receive both a precise understanding of potential exposure and a direct, monetised assessment of future climate risks.

At Scientific Climate Ratings, an EDHEC Venture, we are dedicated to turning climate science into actionable financial insights.

Now you know.

Find out how PCER and ECRR work: