Financial Risk Analysis

Data Description

Currently, Sust Global focuses on two forms of financial risk analysis (sometimes referred to as Value-at-Risk or VaR):

Structural Damage - Direct damage to structures, including homes, warehouses, businesses, etc., due to climate hazards, defined in terms of percentage of the structures value expected to be destroyed. For structural damage, we estimate impacts from wildfires, floods (both coastal and inland), and tropical cyclones.
Business Interruption - Processes that make it impossible to conduct business for a certain period of time, either by destroying business assets, including structures; by making business impossible to conduct; or by impacting transportation or energy grid networks in the nearby vicinity of the business. We define business interruption in terms of days per year in which business cannot be conducted. For business interruption, we estimate impacts from wildfires, floods (both coastal and inland), tropical cyclones, and heatwaves. We use two tiers of business interruption: tier 1 involves impacts to structure itself, while tier 2 involves impacts to an asset’s surrounding road network and powerlines. Tier 1 is available through the API and dashboard, while tier 2 is available as a csv dataset on request. We estimate days of interruption using a combination of empirical damage functions and models of future weather so severe business could not be conducted.

The methodology involves determining an assets exposure to a given hazard under different scenarios of climate change throughout the 21st century. This hazard exposure is then translated into expected losses, in terms of either structural damage or business interruption, via a damage function, also known as a vulnerability curve. These damage functions are based on observational data and allow us to estimate how much damage a given hazard, at a given intensity would be expected to do to a specific type of asset, structure, or business. Combining hazard exposure data with a damage function yields expected losses at a given hazard intensity. Then, for hazards for which different levels of intensity exist, we integrate over the intensity values to derive a single annual value of expected loss.

Methodologies

Floods

To calculate financial risk from flooding, we start with flood risk exposure data in the form of annual exceedance probabilities (also known as Return Periods). This data essentially describes the annual likelihood of flooding of a given depth. We combine this data with Depth-Damage-Functions from the US Army Corps of Engineers. These functions (also known as impact functions or vulnerability curves) describe the expected damage to a given structure type for a given flood depth. For example, a flood of depth 1m may damage 30% of a structure’s total value, for the typical single family wooden home.

The curves provided by the Army Corps were designed specifically for the United States. In order to adapt them for global use cases, we apply regional calibrations using data from the CLIMADA risk analysis framework. These calibrations account for large-scale differences in building standards around the world. For example, these calibrations allow us to more accurately describe the impact of 1m of flooding in Japan (where building standards are very high) and other places of the world where standards may be lower.

Cyclones

To calculate financial risk for cyclones, we start with wind speed exposure data in the form of annual exceedance probabilities (also known as Return Periods). This data essentially describes the annual likelihood of a given wind speed. We combine this data with regionally specific vulnerability curves from the CLIMADA risk analysis framework. These functions (also known as impact functions or vulnerability curves) describe the expected damage to a given structure type for a given wind speed. For example, a wind speed of 60 meters per second may damage 50% of a structure’s total value, for the typical single family wooden home.

Wildfires

For wildfire, we take a different approach to measuring damage. In the event of exposure to wildfire within 1km of an asset, we assume that there is a 10% change that the asset is affected by the fire, and if affected, a fire would destroy 75% of an assets value. These values are derived from research on historic impacts from wildfires in California.

Heatwaves

We use heatwaves in the business interruption analysis, which we define as days per year above the 98th percentile for temperature of the previous 30 years. The 98th percentile value is location- and time period-specific due to the fact that whether a heatwave disrupts business depends in part on normal temperature ranges in a given location, as well as whether those normal ranges encourage the use of adaptive technology, such as air conditioners.

Asset Type Specific Damages

In order to more accurately calculate financial risk, it is possible to upload asset types, via the label:type column. This allows us to apply specialized impact functions based on the uploaded asset type, accounting for industry- and structure-specific characteristics.

Available Asset Types

The available asset types are given in the table below. For Climate Explorer to recognize an asset type, you must include a column named label:type that matches exactly the label given below in bold.

CATEGORY	LABEL FOR USE IN CE	EXAMPLES OF THIS TYPE OF ASSET
Agriculture	Agriculture	Agricultural areas, horse stalls, veterinary offices
Commercial	Retail Trade	Appliances, Auto Dealer, Auto Dealership, Bait Stand, Bait Stand, Bakery, Bakery, Boat Sales/Service, Book Store, Book Store, Camera Store, Candy Store, Carpet and Paint Shop, Clothing, Clothing Store, Clothing-Mens, Convenience Store, Crafts, Department Store, Department Store, Drive thru market, Drug, Drug Store, Fabric Store, Feed Store, Flea Market, Florist, Fruit Stand, Furniture, Furniture Store, Gas Station, Gas/Butane Supply, Gift Shop, Greenhouse, Gun Shop, Hardware, Hardware, Hobby Shop, Home Repair Store, Large Furniture, Large Grocery, Lawnmower, Liquor, Liquor Store, Liquor Store, Meat Market, Medium Grocery, Motorcycle Dealer, Music Center, Neighborhood Grocery, Nursery, Paint Store, Pawn Shop, Remnant Shop, Service Station, Service Station, Shoe Repair, Shoe Store, Small Grocery, Supermarket, Toy Store, Tractor Sales, Trophy Shop, Upholstery Shop, Used Appliances/Cloth, Used Furniture, Vacuum Cleaner Sales, Variety Store, Video Games, Wine Store.
	Parking	Garage
	Wholesale Trade	Auto Junk Yard, Auto Parts/Mufflers, Beer Warehouse, Bottled Gases Warehouse, Food Warehouse, Heavy Equipment Storage, Jewelry, Lumber Yard, Lumber, Machine Parts Storage, Medical Supplies, Municipal Storage Warehouse, Paper Products Warehouse, Private Storage, Quonset Hut Storage, Safety Equipment, Sporting Goods Warehouse, T.V. Repair, T.V. Station, Trailer Parts, Warehouse
	Personal and Repair Services	Auto Repair, Barber Shop, Beauty Salon, Boat Service, Car Wash, Cemetery, Cleaners substation, Funeral Home, Laundry, Photo Studio, Private Day Care, Re-Upholstery, Truck Mfg & Sales, Washateria, Watch Repair
	Professional/Technical Services	Accounting Firm, Airport, Big Office Commercial, Boat Storage, Business, Filtering Plant, Import Sales, Legal Office, Office Building, Piers, Professional, Real Estate Office, Sewage Treatment, Transport Company, Utility Company
	Banks	Bank
	Hospital	Hospital
	Medical Office/Clinic	Chiropractic Clinic, Dentist’s Office, Doctor’s Office, Medical Office, X-Ray Service
	Entertainment & Recreation	Bowling Alley, Cafeteria Restaurant, Country Club, Drive-In Restaurant, Fast Food Restaurant, Fishing Party Boat, Full-Service Restaurant, Lounge, Physical Fitness, Private Club, Private Golf Course, Private Pool, Recreation Facilities, Restaurant, T.V. Station, Tavern, Telephone Exchange
	Theaters	Private Hall, Indoor Theater, Movie Theater, Organization Hall, Drive-In Theater
	Commercial	Generic grouping for items in Commercial category
Education	Grade Schools	Commercial School, Library, School, Elementary School
	Colleges/Universities	College, University
	Education	Generic grouping for items in Education category
Government	General Services	City Hall, Post Office, Government facility
	Emergency Response	Fire Station, Police Station
	Government	Generic grouping for items in Government category
Industrial	Heavy	Boiler Building, Cabinet Shop Mfg, Concrete Mfg, Door Mfg, Fabrication Shop, Heat Exchanger Mfg, Heavy Machine Shop, Lumber Mill, Metal Coatings Services, Metal Recycling, Pipe Threader Facility, Research Lab-Machine, Welding-Machine
	Light	Battery Mfg, Commercial Printing, Cooling Tower, Electronic Equip Mfg, Frame Shop, Furniture Mfg, Industrial Loading Dock, Instrument Mfg, Leather Goods Mfg, Locker Bldg, Maint Bldg-Mfg Facility, Newspaper Print Plant, Newspaper Sales Office, Office-Manuf Facility
	Food/Drugs/Chemicals	Chemical Laboratory, Chemical Plant Bonding, Chemical Plant, Chemical refinery, Detergent Manuf. Facility, Feed Mill, Food Processor, Meat Packing, Oil Storage Tanks, Plastic Mfg
	Metals/Minerals Processing	Foundry, Refinery-Lead, Sand & Gravel, Sheet Metal
	High Technology	Data Center, Microchip Manuf.
	Construction	Carpet Tile Flooring, Carpeting Service, Construction Co, Contractor Roofing, Contractor-Electric, Heating & Air Conditioning Service, Pier Drilling Co, Plumbing Co, Plumbing Services, Sandblasting Co, Water Well Service
	Industrial	Generic grouping for items in Industrial category
Religion	Churches and Other Non-profit Org.	Church, Civic Association
Single Family	Single Family Dwelling	One, two, or three story, with or without basement
Residential	Manuf. Housing	Mobile Home, Manufacture Home
	Multifamily Dwelling	Apartments, Condominium
	Temporary Lodging	Hotel, Motel
	Institutional Dormitory	Institutional Dormitory
	Nursing Home	Nursing Home, Rest Home
	Residential	Generic grouping for items in Residential category