c) climate risks on cash flow available for debt service

Due to potential damages and carbon taxes, additional costs are not included in the factor models that primarily focus on the current economic and financial trends. Yet, these costs directly affect the companies’ cash flows in company-specific and scenario-dependent ways. Accordingly, we reduce the CFADS calculated from the factor models as follows:

The use of ΔCarbon Cost avoids double counting the potential effects of carbon taxes in those cases where countries have already started charging carbon taxes and carbon costs are already included in the CFADS calculation.