Science ratings put dollar value on climate risk
France's EDHEC business school has launched a scientific rating agency that can put a precise dollar value on the impact of climate risk for infrastructure projects and some companies.
Scientific Climate Ratings offers forward-looking ratings that can quantify how the financial value of assets is affected by transition risks linked to the shift to a low carbon economy and physical risks arising from climate hazards such as floods, storms, heatwaves and wildfires.
"We think that there is a critical disconnect, because physical risk and climate risk in general are accelerating, but they are generally poorly assessed as vague, non-financial concerns. We are trying to go beyond ESG ratings and translate exposure to climate risk into concrete monetary terms," said Remy Estran-Fraioli, CEO of Scientific Climate Ratings.
Born out of EDHEC's Climate Institute, SCR currently offers ratings for more than 6,000 infrastructure assets using EDHEC's ClimaTech database and more than 5,000 listed corporates will be added in 2026.
Companies reporting under IFRS will have to quantify the current and expected financial effect of climate-related risk and put this information into their financial statements under IFRS S2.
Two types of ratings are offered. Potential Climate Exposure Ratings assess exposure to future climate risks under a business as usual scenario and are free and publicly available on SCR's website.
Bespoke Effective Climate Risk Ratings estimate the financial impact of climate risks from 2035 to 2050 by applying probabilities to multiple climate scenarios and include a quantified dollar impact expressed in net asset value terms and are behind a paywall.
"We are moving from a stress testing only approach to an expected value approach," Estran-Fraioli said.
The database lists decarbonisation and resilience strategies for each type of asset and their effectiveness in terms of avoided emissions and reduced physical damages.
The data show that network utilities are the most exposed, with an expected 41% NAV loss, driven primarily by storms and floods as these assets — including electricity grids, water networks, and telecom infrastructure — are highly vulnerable to localised extreme weather and their failure can cascade across systems, amplifying financial losses.
Transport infrastructure has a 17% risk, mainly from wildfires and flood events, as roads, railways, airports, and ports are often located in coastal or next to forests, where exposure to rising sea levels and climate-induced wildfires is increasing sharply.
Social infrastructure such as schools, hospitals and public buildings, appears relatively protected, with only 7% risk, reflecting lower exposure to physical hazards and transition pressures.
Excluding renewables, transition risks also weigh heavily on power generation, which is facing rising carbon prices and stricter regulation. Renewable generation benefits from changing policy and consumer preferences that enhance long-term value.
The ability to identify and quantify sector differences and express climate risk in precise monetary terms also allows users to identify which assets are vulnerable and which are resilient, and even price the value and benefit of a resilience strategy.
"We can price the value of an adaptation strategy and that's very important because resilience can be a game-changer and that's also something that investors want to see. Asset-specific vulnerability can be lowered through the use of adaptation strategies," Estran-Fraioli said.