Business on the Edge 2024

A2 Fixed asset loss quantification method Quantifying the impact of the nature and climate crisis on business To estimate the financial risk to fixed company assets of failing to adapt to rising frequency and severity of climate hazards, the following approach was used: 1 Estimate fixed asset losses by company and industry due to seven physical climate hazards To estimate financial losses due to physical climate hazards, the value of fixed assets held by 5,736 large, listed companies (2023 or latest year available; accessed May 2024) was sourced from S&P Capital IQ (see A in Figure 24). The companies selected all had annual revenues of more than $1 billion, a threshold employed to maximize data availability. These fixed asset values were then multiplied by a company-level fixed asset climate hazard risk score sourced from S&P Global Sustainable1 – a weighted average of financial losses due to climate hazards reflected as a percentage of asset value for all known assets owned by a company and its subsidiaries (B). This produced an overall fixed asset loss estimate in US dollars (C), with the value of fixed assets assumed to be constant across the forecast period (see Section 6: Limitations to the approach). The results were then aggregated by industry (D) and can be seen in Figure 5 of the report. An illustrative example for a large retailer is shown below: Illustrative annual fixed asset loss calculation for a large retailer FIGURE 24 S&P Global Sustainable1 Physical Risk Financial Impact dataset The S&P Global Sustainable1 Physical Risk Financial Impact dataset estimates the financial losses arising from changing climate hazard exposure. Data is presented as a percentage of each company’s fixed assets for over 250 unique asset types across 3.1 million corporate assets and different future climate- change scenarios. The climate-change scenarios used in this analysis are based on IPCC Representative Concentration Pathways and Shared Socio-economic Pathways and are informed by the TCFD technical guidelines. The impact of climate hazards is simulated relative to a baseline time period before the impact of climate change was apparent; for example, for extreme heat, the baseline period is 1980-2000. The three scenarios used in this analysis are: –High Climate-Change Scenario (SSP5-8.5): Low mitigation scenario in which total greenhouse gas emissions triple by 2075 and global average temperatures rise by 3.3-5.7°C by 2100. –Medium-High Climate-Change Scenario (SSP3-7.0): Limited mitigation scenario in which total greenhouse gas emissions double by 2100 and global average temperatures rise by 2.8- 4.6°C by 2100. This is labelled as Medium in the analysis for simplicity.D Fixed asset loss (for industry) $78.2 billionA Estimated fixed asset value $277 billionB Fixed asset climate hazard risk score 2.69%C Fixed asset loss (for company) $7. 4 billion Business on the Edge: Building Industry Resilience to Climate Hazards 63