Let’s get physical: Comparing metrics of physical climate risk

Linda I. Hain, Julian F. Kölbel and Markus Leippold

Finance Research Letters, 2022, vol. 46, issue PB

Abstract: Investors and regulators require reliable estimates of physical climate risks for decision-making. While assessing these risks is challenging, several commercial data providers and academics have started to develop firm-level physical risk scores. We compare six physical risk scores. We find a substantial divergence between these scores, also among those based on similar methodologies. We show how this divergence could cause problems when testing whether financial markets are pricing physical risks. Hence, financial markets may not adequately account for the physical risk exposure of corporations using available risk scores. Finally, we identify key sources of uncertainty for further investigation.

Keywords: Climate change; Physical risk scores; Disagreement; Model uncertainty (search for similar items in EconPapers)
JEL-codes: G12 G24 G32 Q54 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321004013

DOI: 10.1016/j.frl.2021.102406

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