Understand Physical Climate Risk: Introducing Moody’s Climate on Demand Version 2

We are excited to introduce Moody’s Climate on Demand version 2. This major version update to the existing Climate on Demand application has been built for those looking to understand the financial impacts of climate change on their business.

It does this by delivering a forward-looking view of global exposure to physical climate risks, including floods, heat stress, hurricanes and typhoons, sea level rise, water stress, wildfires as well as non-climatic risks such as earthquakes.
 

Updated New Methodology for More Comprehensive Climate Risk Modeling

This latest version includes an updated methodology (2023.1) that advances the climate risk analyses and scoring capabilities of Moody’s unified physical risk solution. The new methodology is deeply data-driven and looks to capture the nuances of risk drivers by incorporating a broad array of indicators, each focused on a distinct dimension of climate risk.

A major difference between versions 1 and 2 of the application is how the latest methodology can now incorporate Moody's RMS climate risk models. As a significant first step, Climate on Demand version 2 will incorporate flood hazard into its methodology, to start to unlock the benefit of Moody's RMS’s long-standing expertise in climate science, engineering, and financial modeling.

The inclusion of Moody's RMS risk models into Moody’s RMS Climate on Demand is just one of the exciting developments as a result of Moody’s acquisition of Moody's RMS in late 2021, which set the stage for a robust partnership that would accelerate Moody’s physical climate risk capabilities.

Moody's RMS is the world’s leading provider of climate and natural disaster risk modeling, widely respected by the insurance sector to underpin billions of dollars of risk transactions every day, with a catalog of over 400 risk models covering 120 countries.

These models are now also being adapted to the needs of asset managers, banks, investors, corporates, and governments to understand the potential future financial impacts of climate change, so they can make better decisions today.

You can explore Moody's RMS’s sophisticated risk models here and read an overview of Moody's RMS’s climate risk modeling here.

With the incorporation of Moody's RMS flood risk expertise, a major enhancement in this new methodology is the ability to model flood risk in greater detail with flood hazard resolutions increased from 90 meters x 90 meters to 30 meters x 30 meters.

The improved methodology also combines the impact of flood defenses, local drainage systems such as those in urban areas, and a machine learning model to better represent flood risk around the world where data is often scarce. This all provides a greatly improved representation of flood risk. (You can learn more about RMS’s flood modeling here)

Integration into Intelligent Risk Platform for Secure and Reliable Access to Climate Risk Analytics

Another important update in the new version is the integration of Climate on Demand with Moody’s RMS Intelligent Risk Platform™ (IRP).

The platform supports multiple risk applications and comes with built-in compliance for industry-recognized requirements such as GDPR, SOC 1 and SOC 2, ISO 27001, and C5 as well as service level agreement (SLA) that provide higher uptime for applications.

The new integration with the IRP provides a unified way to serve climate risk data and deliver future enhancements through to the Climate on Demand application much faster.

Coming Enhancements to Climate on Demand

With Climate on Demand benefiting from integration with the IRP, this allows version 2 to continue to incorporate new and exciting climate analytics. New ‘Impact Scores’ and ‘Financial Loss Metrics’ are set to be introduced that will provide users with even more detailed insights into the cost of climate change, whether it is from damage to assets, business interruption, reduced productivity, or increased running costs.

This will bring a deeper understanding of a user’s climate risk by incorporating exposure and vulnerability as well as hazard to really understand which assets are most vulnerable to climate change, and what the business impact could be to an overall portfolio.

You can read a quick overview of the ‘Impact Scores’ and ‘Financial Loss Metrics’ coming soon to Climate on Demand here.

The integration of Climate on Demand into the IRP will also mean that in the future, users can take advantage of capabilities like currency conversion controls, security controls for users, and API access.

This will also include event analysis to help users replay past events on a portfolio, with all the other platform applications able to access the analysis for more comprehensive processing of financial results and understanding of climate risk.

To stay up-to-date on new developments for Climate on Demand, you can visit the Climate on Demand site here.