S&P Reveals Fallout From Climate Change on Asset Values

Data Show that 90% of The Largest Companies in The World Will Have at Least One Asset Vulnerable to Climate Risk

According to a new data analysis tool released by a division of S&P Global, the repercussions of climate change would be felt across industries, eroding asset values and prompting investors to undertake new risk assessments.

According to data provided by S&P Global Sustainable1, by the year 2050, more than 90% of the world’s largest corporations would have at least one asset that is financially susceptible to climate hazards like wildfires or floods. Also, as the world warms, the value of at least one asset will drop by 20% or more for more than a third of these businesses.

According to James McMahon, CEO of The Climate Service, which was acquired by S&P earlier this year, “more than ever, investors and organizations are seeking advanced analytics to respond to the financial effect of climate change.” This new S&P information allows clients to estimate “future financial consequences of altering hazard exposure for 20,000 enterprises, down to the rooftop level,” as he put it.

S&P Reveals Fallout From Climate Change on Asset Values

It’s the most recent in a line of products released to assist companies and investors in gauging the monetary risks associated with climate change. This month, three major financial institutions—JPMorgan Chase & Co., Fitch Ratings, and Morningstar, Inc.—all introduced new, competitive products to meet rising customer demand.

Over 870,000 corporate assets including warehouses and data centers are evaluated by the S&P Global Sustainable1 product. It concluded that by the 2050s, under a business-as-usual scenario, water stress and excessive heat will have the greatest impact on the financial stability of the S&P 500, threatening up to 10% of its total assets.

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Clients are putting significant pressure on providers of global data and risk assessments to give increasingly nuanced insights into environmental, social, and governance issues. The reason is, that severe weather is altering the earth and making larger and larger areas of it uninhabitable over time.

Temperatures on Earth are currently 1.1 degrees C higher than they were before the industrial revolution. Even if countries limit warming to the lower threshold of 1.5 degrees Celsius, as outlined by the Paris Agreement, scientists predict that several crucial planetary systems are at risk of breaking beyond repair.

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