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Portfolio Analytics
 

Translate climate models and macro trends into an integrated view of financial impact.

 

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Portfolio Analytics applies machine learning to a wide array of datasets to calculate the financial impact of climate volatility at the portfolio and asset level. 

Our toolkit enhances market forecasts, supports due diligence for underwriting and guides future investment strategies.

Portfolio Analytics Overview - Climate Alpha

Heatmaps

Physical Risk & Resilience Adjusted Valuations

Indicators

Generate Heat Maps

to visualize risk and/or resilience clusters within a given portfolio of fixed assets

Quantify Financial Impact

across different timelines and climate scenarios to modify hold/sell periods, protect yield and ensure exit liquidity 

Measure Risk and Resilience

for any location by climate risk (heat, hurricane, flood, fire, drought and sea level rise) as well as its preparedness to manage those disruptions

Competitive Edge

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Multiple Climate Change Scenarios

Deploy the latest IPCC models to forecast impact annually until 2100

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Wide Data Approach

Public and private market datasets offering climate risk, real estate and socioeconomic intelligence

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Opportunity Focused

Target underpriced and resilient markets with a differentiated investment strategy

Quantifying the Financial Impact of Climate Change

Climate Alpha is unique in capturing both the physical climate risk and the resilience-adjusted impact of climate change.

 

The Physical impact and Resilience-adjusted impact are coefficients that explain the divergence of a location’s financial performance under a given climate scenario from its baseline (one that assumes no climate change).

Physical impact projects the financial impact of physical climate risks under a climate scenario, given as a percentage change from the location's historical baseline performance.

Resilience-adjusted impact modifies Physical Impact with a location's resilience profile in order to capture its capacity to offset climate risks. 

Physical and Resilience Adjusted Impact - Climate Alpha

Benchmarking Locations to Establish Risk and Resilience Profiles

Different markets respond uniquely to climate hazards and resilience measures.

 

A location's coefficients are determined by its historic sensitivity to hazards multiplied by its relative risk and resilience profile. The greater the divergence, the higher or lower the coefficients. 

 

Sensitivity to hazards refers to the historical impact of climate hazards on real estate performance. This is calculated by the difference in the ROI of assets in areas exposed to risk versus the mean ROI of its larger real estate market (e.g., Zip codes versus CBSAs).

Relative risk and resilience profile is the future risk and resilience rating of a location indicated by its Z-score against the national distribution obtained by standardizing all indicators.

 

The greater the divergence from the mean, the better or worse its profile will be. 

Impact Coefficient Climate Alpha
Impact Coefficient Climate Alpha
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Assessing the Impact of Climate Change 

Both the physical impact and resilience-adjusted impact can be applied to the value of assets to estimate their future economic performance.

 

For example, if the estimated value of a property is forecasted to be $10M in 2030 based on historical returns, a physical impact coefficient of –5% yields a risk-adjusted value of $9.5M. Yet if the location boasts robust readiness traits to offset climate risk, the resilience-adjusted impact could be just –1%, resulting in a projected 2030 valuation of $9.9M

 

Locations that exhibit low risk, high resilience, and proximity to under-performing areas may achieve accelerated growth forecasts as a result of their "anti-fragility," gaining investment and migration at the expense of under-performing areas.

Portfolio Analytics Climate Alpha
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