• Climate change creates financially material risks for infrastructure assets through physical risks from climate hazards and the transition dynamics associated with the shift towards a low-carbon economy, with direct implications for long-term asset valuation.
• Scientific Climate Ratings develops forward-looking climate risk assessments based on scientific modelling, high-resolution geospatial data, extensive financial datasets and climate research from the EDHEC Climate Institute.
• Our Climate Risk Rating (CRR) quantifies the financial materiality of climate risks by translating physical and transition risks into percentage impacts on net asset value, using a valuation-based, scenario-driven framework.
• Applying CRR across a global infrastructure asset universe indicates that climate risk impacts vary across assets, depending on sector characteristics, location and asset risk exposure.
• For institutional investors, CRR supports the integration of climate risk into valuation, due diligence and portfolio risk management decisions.

As highlighted by Jeanette Orminski, Senior ESG & Sustainability Researcher at the EDHEC Climate Institute, climate risk is increasingly becoming a core financial and valuation issue for infrastructure investors rather than simply a sustainability consideration. In the article “From Climate Hazard to Asset Value: Identifying Climate Risk in Infrastructure Investments”, the author demonstrate how physical climate hazards and transition dynamics can materially impact long-term infrastructure asset values, cash flows, and investment performance.

The framework developed by Scientific Climate Ratings and the EDHEC Climate Institute translates climate-related risks into measurable financial impacts on net asset value (NAV), enabling investors to assess climate exposure through a valuation-based and scenario-driven lens. By integrating climate science, geospatial data, macroeconomic variables, and financial modelling, the Climate Risk Rating (CRR) provides a forward-looking methodology for evaluating infrastructure resilience and long-term investment viability.

The research further highlights that climate risks are highly asset-specific and unevenly distributed across sectors and geographies, reinforcing the importance of incorporating climate considerations directly into valuation, due diligence, and portfolio risk management processes. The findings underline the growing need for institutional investors to adopt more sophisticated, decision-useful approaches to climate risk assessment as part of long-term capital allocation strategies.

Read the full article here.