Physical Risks
The Physical Risks research programme develops methods to quantify climate-change-driven physical risk impacts across time and space, with a particular focus on critical infrastructure, real estate and listed equities. Our approach leverages large-scale climate data processing, spatial econometrics, and advanced risk modelling to inform and enhance investment strategies within a warming context.
The Physical Risks research programme focuses on evaluating the climate-related impacts on human activities, assets and the economy, in particular quantifying the financial impacts of physical risks for different types of assets and projecting the larger scale economic and financial implications of physical climate risks within a climate change context.
We typically distinguish between two main categories of physical climate risks :
- Acute risks: Extreme weather events such as hurricanes, floods, wildfires, and heatwaves that can cause immediate damage to infrastructure, supply chains, and economic activity.
- Chronic risks: Long-term shifts in climate patterns, including rising temperatures, sea-level rise, prolonged droughts, and ecosystem changes, which gradually affect sectoral productivity, asset values, and financial stability.
Our interdisciplinary approach unveils the combined power of high-resolution climate data from different sources (climate data, satellites), precise descriptions of assets, asset-specific damage functions, spatial econometrics, and advanced risk assessments to provide tailored diagnostics of physical climate risk exposure over a wide diversity of assets including:
- Infrastructure assets– e.g., Transport networks, power grids and plants subject to immediate infrastructure and operation damages.
- Listed equities – Publicly traded companies whose market valuations are increasingly influenced by (i) their exposure to physical climate risks and (ii) the effectiveness of their risk management, as reflected in audited financial statements to investors.
Investors increasingly require not just temporal insights but also region-specific solutions. Our approach to physical climate risks puts maximum emphasis on robustness and granularity, enabling scalable applications from local/asset scale, meso-levels all the way up to macro financial indices.
The programme is a joint collaboration between EDHEC Climate Institute and two key EDHEC ventures: Scientific Portfolio and Scientific Climate Ratings. Our core mission is to enhance physical risk assessments to better inform investment strategies in a changing climate.
The experts
- Nicolas Schneider, Senior Research Engineer - Macroeconomist
- Anthony Schrapffer, Scientific Director
- Qinyu Goh, Sustainability Data Scientist
About EDHEC
Operating from campuses in Lille, Nice, Paris, London and Singapore, EDHEC is one of the world’s top 15 business schools. Fully international and directly connected to the business world, EDHEC commands a strong reputation for research excellence and the ability to train entrepreneurs and managers capable of breaking new ground. EDHEC functions as a genuine laboratory of ideas and produces innovative solutions valued by businesses. The School’s teaching is inspired by its research work and a focus on “learning by doing”, all with the aim of equipping people with the skills to succeed in business.
