If you own or manage assets, here are some examples of important questions that need urgent answers:
How bad is your hospital’s exposure to climate-driven risks in California, and what level of losses should you expect from wildfires in the state over the coming years?
Which one of your manufacturing plants in Florida is most exposed to flood or sea level rise, and what would the extent of financial damage be like?
Will your Texas farm be under water stress or be under flood risk by the year 2040, and what would be the financial consequences of each scenario?
For anyone looking to fully understand the risks within an asset portfolio, the potential impacts from current climate risk and climate change are increasingly important elements to capture.
To help assess these risks, Moody's Climate on Demand provides financial loss metrics, as well as impact scores for both climate and climate change-related risks.
The data used in the Climate on Demand application helps users to incorporate risks from physical 'nature-made' perils including floods, wildfires, hurricanes and typhoons, and earthquakes as well as chronic climate risks including heat stress, water stress, and sea level rise.
Together this data helps users translate physical climate risks into financial impact for a given location and portfolio.
The Moody’s Climate on Demand solution features two distinct editions, a Standard edition, and a newly launched Pro edition. Let’s look at the differences between the two editions:
1) Climate on Demand Standard Edition delivers basic climate risk scores based on nature-made perils as previously mentioned, including floods, wildfires, hurricanes and typhoons, and earthquakes, plus chronic climate risks including heat stress, water stress, and sea level rise, from today to the year 2100.
This standard edition is ideal for users looking to understand where the risk from the current climate and climate change is greatest within a portfolio by location, how these risks will change over time with the impact of climate change, and to help with climate risk reporting, regulatory filings, and so on.
2) Climate on Demand Pro Edition delivers everything provided within the Standard edition but also includes advanced climate risk impact scores and financial metrics on the same perils/hazards as mentioned above.
For a specific risk, the Pro edition provides metrics on how the risk will be impacted by today's climate and how the impacts will evolve over time due to climate change through to the year 2100, based on Moody’s RMS modeled loss experience.
The Moody’s Climate on Demand Pro Edition is ideal for users looking to understand financial impact and build derived metrics that quantify the risk to asset value or risk of a mortgage default and so on.
The Moody's RMS modeled loss experience benefits from the longstanding commitment that Moody’s RMS has in deploying the latest superior science together with validation from three decades of historical claims experience from its cooperation with the insurance industry.
All of this accumulated expertise helps users to understand how hazards impact their assets and how the vulnerabilities of these assets result in financial loss both from direct damage and the ongoing financial impact of an asset being unavailable (aka business interruption).
You can read more about how the science and experience Moody's RMS has in building models have been incorporated into Moody's Climate on Demand Pro metrics in two recent blogs here and here.
You can also find a roadmap for Moody’s Climate on Demand here.
Getting Started with Moody’s Climate on Demand Pro
Once you have licensed Moody’s Climate on Demand Pro, it is a straightforward process to evaluate your portfolio for climate and climate change-related risks.
These include Annual Average Damage metrics in currency values, and standard deviation, expressing year-on-year volatility of damage estimates for each time horizon (such as 2030, 2040, and so on), and IPCC Representative Concentration Pathway (RCP) climate change scenarios (RCP4.5 & RCP8.5) for climatic perils such as wildfires, hurricanes, and floods, etc.
The Python sample available on GitHub may require the download and installation of a few libraries through the Package Manager (e.g. requests, pandas, and python-dotenv or execute env_setup.sh for Bash users).
There are three important steps to retrieving the risk data from Moody’s Climate on Demand:
Get an auth token: get_cod_api_token(api_userID, api_password, api_tenantID)
Submit your job: kick_off_cod_lookup_job(api_tokenID, api_data))
These steps are outlined in the file climate_risk_data_with_cod.py.
The sample uses a small list of random addresses to build a job, then it retrieves climate risk scores and finally saves the output to a cod_output.csv file. You can see a sample output in the GitHub repository.
There are a number of configuration parameters you will need to set to get started, including your credentials (email, password, base URL for your tenant as well as your tenant name) under the .env filename.
A sample .env file can be found in the repository under sample.env.
userID = 'your_CoD_username/email'
password = 'your_CoD_password'
baseURL = 'your_URL_for_CoD'
tenantName = 'your_CoD_tenant_name'
Once you retrieve your access token, the application randomly picks a few addresses; this is controlled by the total locations that you can configure in the .env file under the totalLocations setting, to provide a list of addresses for the application to use to retrieve risk data.
The sample uses the generic label of ‘Office’ as the asset type used for calculating risk data, however, you can pick from a list of other business activities including classifications like ‘Data Center’ or ‘Entertainment Complex,’ through to ‘Power Plant’ to get more accurate details on a given location.
The generated output contains annualized damage rates as well as the standard deviation for each peril (wildfire, hurricane, flood, and so on) as well as a total risk number across all perils.
The following sample output shows the average_annual_damage as well as the impact score output.
Detailed documentation on Moody’s Climate on Demand APIs can be found in Moody’s RMS Support Center at https://support.rms.com/.
Additional details on the Moody’s Climate on Demand methodology, risk scores, impact scores, and scoring process, are also detailed within the methodology documents at the Moody's RMS Support Center.
More than Checking a Box: Delivering Real-World, Validated Forward-Looking Financial Metrics for Physical Climate Risks
About The Author
Executive Vice President
Cihan Biyikoglu is the Executive Vice President, Product for Moody's RMS, responsible for product management across the full suite of Moody's RMS models and risk management tools. He has extensive experience in leading product management for innovative machine learning and big data analytics solutions at Fortune 500 companies over the last 20 years.
As a former Vice President of Product at Databricks and Redis Labs, Cihan both developed the product strategy and road map for open-source technologies such as Apache Spark and Redis and respective enterprise offerings in the public and private cloud platforms.
Cihan also worked on products at Microsoft, Couchbase, and Twitter, where he focused on on-premises and cloud offerings in the data and analytics space. At Microsoft, Cihan focused on the incubation of the Azure Cloud Platform in its early days and the SQL Server product line, both of which have grown to multi-billion-dollar businesses for Microsoft.
Cihan holds a number of patents in the data management and analytics space, and he has a master’s degree in database systems and a bachelor’s degree in computer engineering.
About The Author
Product Manager, Data Product Management
Colin is a product manager with the data product management team, serving as product owner for Moody's Climate on Demand and other physical climate change risk data products with Moody’s RMS.
He has been working in the physical climate risk space since 2015, serving as Four Twenty-Seven’s Chief Operating Officer prior to being acquired by Moody’s in 2019. Colin has held multiple roles with Moody’s and RMS, overseeing the development and maintenance of climate physical risk products for corporate and financial institutions.
Colin has a master’s degree in Development Practice from the University of California, Berkeley, and a bachelor’s degree in mathematics from the University of Massachusetts.