1.2.2 Physical risk metrics

Besides the transition risk metrics, we developed several physical risk metrics for floods, storms, and cyclones based on an asset’s modelled damage factor and for thermal stress when extreme temperatures affect an asset’s operational business.

Three metrics define the physical risk from 100-, 50-, and 30-year flood, tropical storm, and extratropical storm events. Our climate scenario data focuses on 100-year hazard events only.

• Physical Damage at Risk (PDaR): The PDaR describes the asset level damage factor calculated from the modelling process. PDaR can be understood as the percentage of an asset’s area that is exposed and vulnerable to a hazard event:where hazard information is the average hazard value incurred by an asset during a hazard event (e.g., average flood depth for a flood event), and damage function is a specific mathematical function that translates flood depth into an estimated damage factor.

  • 99% PDaR in % damage to total assets for a 100-year flood, tropical storm, and extratropical storm as of today and for 2030, 2040, and 2050

  • 98% PDaR in % damage to total assets for a 50-year flood, tropical storm, and extratropical storm as of today

  • 96.6% PDaR in % damage to total assets for a 30-year flood, tropical storm, and extratropical storm as of today

• Physical value at risk (PVaR): The PVaR can be understood as the total value of an asset exposed and vulnerable to a hazard event. This is derived by multiplying the financial information of the asset, specifically the total asset value, with PDaR:
  
  The quantified PVaR would be the dollar amount that will need to be repaired or replaced when the hazard event of the respective magnitude occurs.

  • 99% PVaR in USDm for a 100-year flood, tropical storm, and extratropical storm as of today and for 2030, 2040, and 2050

  • 98% PVaR in USDm for a 50-year flood, tropical storm, and extratropical storm as of today

  • 96.6% PVaR in USDm for a 30-year flood, tropical storm, and extratropical storm as of today

• Expected annual loss: The expected annual loss from physical risk is the annualised PVaR of an asset. As the PVaR is only realised in the event of a hazard, the annualised physical risk is useful to provide a realistic expectation of physical risk for an asset to face at all times:
  where the probability of a 100-year-event is 1/100 = 0.01%, the probability of a 50-year-event is 1/50 = 0.02%, and the probability of a 30-year-event is 1/30 = 0.033%.

  • Expected annual loss in USDm for a 100-year flood, tropical storm, and extratropical storm as of today and for 2030, 2040, and 2050

  • Expected annual loss in USDm for a 50-year flood, tropical storm, and extratropical storm as of today

  • Expected annual loss in USDm for a 30-year flood, tropical storm, and extratropical storm as of today

In addition to these physical risk metrics, we use the PVaR to build a sector exposure ranking. This facilitates the analysis of how individual assets compare against infrastructure superclass peers.

• Sector exposure ranking: Within the same TICCS superclass, we rank assets according to the highest expected loss (PVaR), from 1—very low to 5—very high.

  • Sector exposure ranking for a 100-year flood, tropical storm, and extratropical storm as of today

  • Sector exposure ranking for a 50-year flood, tropical storm, and extratropical storm as of today

  • Sector exposure ranking for a 30-year flood, tropical storm, and extratropical storm as of today

For thermal stress, we provide one metric based on the number of heat days per annum and how those stress days impact an asset’s operations.

• Operational revenue loss: Assets’ businesses are mainly impacted by disrupted operations, not physical damage per se. Accordingly, we count the number of days an asset is exposed to temperature thresholds above 30, 35, 40, and 45 degrees Celsius to estimate the number of days it cannot operate at its expected capacity. We calculate the financial impact of this hazard based on an asset’s revenue.

  • number of days per year above 30° C x annual revenue in USDm / 365 as of today

  • number of days per year above 35° C x annual revenue in USDm / 365 as of today

  • number of days per year above 40° C x annual revenue in USDm /365 as of today

  • number of days per year above 45° C x annual revenue in USDm / 365 as of today