New Tool Calculates Climate Change Investment Risk

Climate change risk factors can now be calculated as investment risks with a tool launched by Bloomberg and Riskthinking.AI, a data and software company, the two firms announced.

The tool assesses the physical risks posed to companies by climate change so that investors and advisors can take these factors into consideration when making investments, the companies said. The risks that are used in the assessment are those named by the United Nations’ Intergovernmental Panel on Climate Change.

“Combining Bloomberg’s data on more than one million physical assets with Riskthinking.AI’s highly granular data-set of global climate change projections and proprietary methodology, the indicators provide Bloomberg users with a new and powerful way to assess their exposure to floods, droughts, wildfires, and other climate vulnerabilities,” the firms said in a press release.

“The impact from extreme weather events is of growing concern to investors as well as regulators who are requiring or planning to require the disclosure of climate-related risks in accordance with various reporting” organizations, the firms added.

Bloomberg has data on nearly 50,000 companies covering more than one million manufacturing sites, energy plants, mining operations, office buildings, and retail sites. Riskthinking.AI’s ability to analyze climate conditions will be applied to those companies, the companies said. The information, which is available to Bloomberg customers, is designed to help investors understand what risks companies are exposed to because of climate change.

Each location of a company will be assessed, as well as the individual assets of the parent company and its supply chain, the companies said.

“Achieving reliable assessment of exposure to physical hazards relies on large amounts of geospatial and climate data to effectively account for the uncertainty inherent in future projections,” Patricia Torres, global head of sustainable finance solutions at Bloomberg, said in a statement. “By bringing together cutting-edge climate science with investor grade physical assets data, we can help investors and companies to better navigate the increasingly complex financial and regulatory environment regarding physical risk.”

The companies are rated on a 0 to 100 scale with high, moderate, and low classifications, looking forward to the year 2050.

“Our pioneering methodology enables investors to use the uncertainty inherent in climate modeling as a strength to support better investment decisions,” Ron Dembo, CEO and founder of Riskthinking.AI, said in a statement. “Our outputs consider climate projections from 51 leading climate research centers and universities to capture a broad range of possible future outcomes.”

Source : Financial Advisor