Moody’s to Add Climate Risk Scores on Its Analytics Platform
CRE bears a significant risk to physical climate hazards like floods and wildfires, as well as chronic risks like sea level rise and heat stress.
Moody’s Analytics will now make climate risk scores available on its analytics platform, in a move aimed at helping industry pros better quantify the exposure of commercial properties to the physical impacts of climate change. The firm’s climate risk scoring methodology analyzes both current and future risk and follows the firm’s recent expansion into sub-sovereign climate risk scores introduced by Moody’s ESG Solutions.
In making the announcement, the firm noted that the CRE sector bears a significant risk to physical climate hazards like floods and wildfires, as well as chronic risks like sea level rise and heat stress.
“This integration marks an important step in the evolution of our property analytics platform into a full-service risk assessment proposition for the CRE industry,” said Luis Amador, General Manager of Moody’s Analytics CRE Solutions. “The ability to view property level climate risk data alongside traditional performance metrics offers a competitive advantage at every stage of the CRE lifecycle, from loan or investment screening to ongoing evaluation and reporting. It enables CRE industry participants to build resilience into their portfolios and engage in more forward-looking decision-making.”
Recent research from Moody’s highlighting how climate change is impacting CRE markets notes that developers in Miami are not yet integrating climate risk analysis into property assessments. From 2015 to 2019, the Miami metro saw the highest percentage of assets exposed to flooding but added the most new space to inventory. yet it added the most volume of new space to its inventory during the 2015 to 2019 period.
“While these results tend to contradict the basic idea that risk should lead to lower development, more nuanced theory does support the potential for less impact to be realized in areas which have greater wealth and/or are amenity filled,” Moody’s notes.
Insurance brokerage Aon has suggested that extreme weather cost economies more than $3 trillion from 2010 to 2020. In the US, climate events causing more than $1 billion in damage have quadrupled over the last four decades.
Investors are taking note: around 78% of those surveyed in JLL’s Decarbonizing the Built Environment research this summer identified climate risk as a financial risk, and the firm says real estate investors and developers are increasingly considering climate risk factors when deciding where to buy or build, citing Urban Land Institute data.