a) projection of physical risks

Physical risks are measured by a damage factor DF that indicates the percentage of the infrastructure asset damaged if a hazard event occurs and the probability p that a hazard event occurs. The probability depends on the return period (e.g., for a 100-year return period, there is a 1% chance per year that a hazard event occurs). If no efforts are made to mitigate climate change, we expect the probability, frequency, and severity of hazard events to increase in the future.

In the orderly and disorderly transition scenarios, where climate goals are met (i.e., physical risks are mitigated and the temperature rise remains below 2ºC), we assume the probability and damage factor of hazard events to stay at the same levels as today. In the no transition scenarios, climate goals are not met, and the global mean temperature (GMT) increase is expected to reach about 2.8 degrees Celsius in Current Policies (NGFS) and about 3.6 degrees Celsius in Climate Catastrophe (Oxford Economics) by the end of the century. Accordingly, we expect p and DF to increase with time in these scenarios. Recent research showed that river flood damage in Europe could rise by a factor of about 6 ± 2 by the end of the century in the absence of climate mitigation (i.e., if the GMT increases by 3ºC; Dottori et al., 2023). This is consistent with a growth of about 2.3 ± 0.5 per cent per year until 2100. In line with these numbers, we assume that DF and p grow by 2.5 per cent per year in the Current Policies scenario and 3.5 per cent in the Climate Catastrophe scenario.

For example, for a 100-year return period in the Current Policies scenario, the project company M5 South-West Motorway in Sydney (Australia) has a p = 1.05% chance of losing DF = 11.6% of its total assets in 2023 and a p = 2.1% chance of losing DF = 23.1% of its total assets in 2050. Similarly, the corporate company George Best Belfast City Airport has a p = 1.05% chance of losing DF = 15.6% of its total assets in 2023 and p = 2.1% chance of losing DF = 31.1% of its total assets in 2050.

_{Dottori, F., Mentaschi, L., Bianchi, A., Alfieri, L., & Feyen, L. (2023). Cost-effective adaptation strategies to rising river flood risk in Europe. Nature Climate Change, 13, 196-202. https://doi.org/10.1038/s41558-022-01540-0}